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SUPREME COURT OF INDIA
J. CHELAMESWAR, ABHAY MANOHAR SAPRE, JJ.
M/s. Bhuwalka Steel Industries Ltd. & Another - Appellants
Versus
Union of India & Others - Respondents
Civil Appeal Nos. 7823, 7825 & 7824 of 2014
Decided On : 24-03-2017
(1980) 3 SCC 358; (2014) 2 SCC 576 – Relied upon
(1997) 5 SCC 516 – Distinguished
(b) Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 – Rule 5 r/w section 3A, Central Excise & Salt Act, 1944 – Words “shall be deemed to be” occurring in both Section 3A(2) and Rule 5 – The annual production calculated in pursuance of section 3A is rebuttable by evidence – Section 3A does not create a legal fiction – It embodies only a presumption – Determination of ACP being one time affair it may not hold good for all times – Section 3A therefore provides for adducing evidence for rebutting ACP. (Para 31, 38, 43)
(c) Central Excise & Salt Act, 1944 – Section 3A r/w Rule 96ZP, Central Excise Rules, 1944 – Assessee opting for concessional monthly rate of duty u/R 96ZP(3) – He can switch over to mode of payment of duty u/R 96ZP(1) – Rule 96 ZO(3) and 96ZP(3) not identical – (2001) 9 SCC 645 needs reconsideration. (Para 47, 58)
(2001) 9 SCC 645 – Needs reconsideration
(2000) 4 SCC 206 – Distinguished
AIR 1972 SC 2427 : (1972) 2 SCC 601; AIR 1966 SC 828 – Referred
Facts of the case:
The appellants in Civil Appeal No.7823/2014 M/s. Bhuwalka Steel Industries Ltd. originally owned three (3) industrial units (Hot Re-rolling Steel Mills) located in the State of Karnataka. Subsequently, two of those units came to be acquired by the appellants in the other two appeals in this batch.
The goods manufactured by the three appellants fall under the same class and described under the Excise Tariff Act as “non-alloy steel hot re-rolled products” and they were NOTIFIED GOODS at the relevant point of time.
In all these appeals, the ACP of the concerned factories was determined by different orders. Obviously the ACP so determined was less than the actual production of each one of the factories for the financial year 1996-97. Therefore, the ACP was “deemed” to be the same as the actual production for the financial year 1996-1997 in view of the mandate contained under Rule 5 of the RULES of 1997.
Aggrieved by the determination of the ACP each of the appellants pursued multiple legal proceedings:
1. They appealed to the CESTAT;
2. They invoked the authority of the Commissioner of Central Excise under sub-section (4) of Section 3A; and
3. Simultaneously, they filed writ petitions challenging the validity of the abovementioned Rule 5 in the Karnataka High Court.
The writ petitions came to be dismissed by Single Judge of the High Court. Aggrieved, the appellants carried the matter by way of an intra-court appeal to a Division Bench which dismissed the appeals.
Finding of the Court:
Section 3A of Central Excise & Salt Act, 1944 does not create a legal fiction.
Result: (2001) 9 SCC 645 referred to larger Bench for reconsideration.
JUDGMENT :
Chelameswar, J.
1. These three appeals are factually interconnected and also raise a common question of law.
2. The appellants in Civil Appeal No.7823/2014 M/s. Bhuwalka Steel Industries Ltd. originally owned three (3) industrial units (Hot Re-rolling Steel Mills) located in the State of Karnataka. Subsequently, two of those units came to be acquired by the appellants in the other two appeals in this batch. Further details of the acquisition may not be relevant for the purpose of this judgment.
3. The production activity carried on by the three industrial units of these appellants is subject to levy of excise duty under the Central Excise & Salt Act, 1944 (hereafter ‘THE ACT’). Section 3 [Section 3 insofar as it is relevant for the purpose of this judgment read at the relevant point of time:-
“Section 3. Duties specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied.-
(1) There shall be levied and collected in such manner as may be prescribed,-
(a) a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985;”] of THE ACT is the basic charging section.
4. However, by the Finance Act, 1997, Section 3A [Ins. By Act 18 of 2008, sec. 79 (w.e.f. 10-5-2008). Earlier section 3A was inserted by Act 81 of 1956. sec. 2 (w.e.f. 22-12-1956) and was omitted by Act 58 of 1960, sec. 2 and Sch. I (w.e.f. 26-12-1960) and was again inserted by Act 26 of 1997, sec. 81 (w.e.f. 14-5-1997) and was amended by Act 10 of 2000, sec. 93 (w.e.f. 1-4-2000) and was again omitted by Act 14 of 2001, sec. 121 (w.e.f. 11-5-2001).] came to be introduced in THE ACT.
“Section 3A. Determination of annual capacity of production of the factory for levy of Excise duty.- (1) Notwithstanding anything contained in Section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section.
(2) Where a notification is issued under sub-section (1), the Central Government may, by rules, provide for determination of the annual capacity of production, or such factor or factors relevant to the annual capacity of production of the factory in which such goods are produced, by the Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory:
Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production.
(3) The duty of excise on notified goods shall be levied, at such rate as the Central Government may by notification in the Official Gazette specify, and collected in such manner as may be prescribed:
Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed.
(4) Where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and re-determine the amount of duty payable by the assessee with reference to such actual production at the rate specified in sub-sec
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