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2022 Supreme(Kar) 4

IN THE HIGH COURT OF KARNATAKA AT BENGALURU
S. SUNIL DUTT YADAV. J
M/s.V.S.Products A Proprietary Firm Represented by its Proprietor Mr. Manoj Kumar Srivastava S/o Sitaram Srivastava - Petitioner
Vs.
Union of India Represented by Joint Secretary Ministry of Finance, Department of Revenue Room No.46, North Block, New Delhi - Respondent
WRIT PETITION No.52371/2019 (T-RES), WRIT PETITION No.51473/2019 (T-TAR), WRIT PETITION No.52323/2019 (T-RES), WRIT PETITION No.52374/2019 (T-RES), WRIT PETITION No.651/2020 (T-RES), WRIT PETITION No.713/2020 (T-RES), WRIT PETITION No.2318/2020 (T-RES), WRIT PETITION No.6114/2020 (T-RES), WRIT PETITION No.6122/2020 (T-RES), WRIT PETITION No.3810/2021 (T-TAR)
Decided On : 04-01-2022

Advocates Appeared:
For The Appellant :Sri C.S.Vaidyanathan, Senior Advocate, Sri. K.G.Raghavan, Senior Advocate, Ms. Ananyaa Jagirdar, Sri. Prashanth F. Goudar, Sri. Goutham S. Bharadwaj and Sri. Vinay Kuttappa K.S., Advocates
For The Respondent:Sri M. Venkataraman, Additional Solicitor General a/w Sri. Jeevan J. Neeralgi, Advocate

Point of Law: Levy is also for the purpose of revenue generation and the choice of the category of goods for the purpose of revenue generation cannot ipso-facto be a ground of judicial review and something more is required such as hostile discrimination and singling out a particular category of goods.

Headnote:
Central Goods and Services Tax Rules, 2017 - Rule 10 (1) - Central Excise Registration Rules, 2002 - Rule 9 - Constitution of India, 1950 - Articles 14, 246A and 248 - Central Goods and Services Act, 2017 - Section 174 - Central Excise Act, 1944 - Constitution (101st Amendment) Act, 2016 - Goods and Services Tax - Manufacturers of Tobacco and Tobacco products - Levy of basic excise duty and NCCD - Constitutional validity - Whether simultaneous levy of GST under Article 246A of Constitution of India and levy of basic Excise duty and NCCD under Article 246 qua tobacco and tobacco products is legally permissible - Whether such simultaneous levies would be consistent with purposive and harmonious construction of Constitution.
Finding of the Court :
It is a settled principle that Legislature has a larger discretion in the matter of classification for purpose of tax. The requirement however is that there is a classification and a rational nexus between such classification and the object sought to be achieved - Levy of NCCD which is for the purpose of discouraging consumption and relates to object associated with the levy cannot be described to be a classification without any basis - The aspect of Manifest Arbitrariness, finding its basis in Article 14, it is accepted that this principle could be pressed into service where the arbitrary actions have "elements of caprice, irrationality, disproportionality or excessiveness and be characterised by the lack of determining principle". There are no grounds made out in the pleadings, calling for application of the said principle - Levy of tax is a product of legislative choice and on policy decisions which are the prerogative of the Executive.
Result: Petitions dismissed

ORDER :

S. SUNIL DUTT YADAV. J

This Order has been divided into the following Sections to facilitate analysis:

I	Preamble	13
II	Contentions of Petitioners	15
III	Contentions of Respondents	24
IV	Consideration : A. Power under Article 246 r/w Entry 84 list I post, the GST Regime and Introduction of Article 246A of the Constitution of India B. Taxing of taxable event, Aspect Theory and Subsumation of manufacture in Supply (i) Subsumation of manufacture in the Concept of Supply ii) Taxing of Taxable event (iii) Aspect Theory C. Legality of levy of NCCD as per Section 136 of the Finance Act, 2001 D. NCCD as a surcharge and Article 271 E. Levy of NCCD during the period of Exemption of Excise Duty F. Levy of basic excise duty and NCCD is violative of Article 14 of the Constitution of India	30

PREAMBLE

1. The petitioners are stated to be manufacturers of Tobacco and Tobacco products and are registered in terms of Rule 9 of the Central Excise Registration Rules, 2002 (“the Rules, 2002” for short). Subsequent to coming into force of the Goods and Services Tax (“GST” for short) regime, the petitioners have registered themselves under Rule 10 (1) of the Central Goods and Services Tax Rules, 2017 (“CGST Rules” for short).

2. The petitioners in W.P.No.52374/2019, 52323/2019, 51473/2019, 6114/2020, 6122/2020, 2318/2020, 651/2020 and 713/2020 have sought for the following reliefs:

a) Setting aside of the Notification No.3/2019 dated 06.07.2019 issued by the first respondent-Union of India whereby Central Excise Duty has been levied on tobacco and tobacco products.

(b) Declaration that the Repeal and Saving provision as contained in Section 174 of the Central Goods and Services Act, 2017 (“CGST Act” for short) insofar as it seeks to save the operation of the Central Excise Act, 1994 qua tobacco and tobacco products as unconstitutional and bad in law.

(c) Declaration that Section 136 of the Finance Act, 2001 under which there is levy and collection of National Calamity Contingent Duty (hereinafter referred to as “NCCD”) as unconstitutional.

(d) In the alternative and without prejudice to the relief at prayer (c), have sought for declaration that Section 136 of the Finance Act, 2001 under which there has been a levy and collection of NCCD has been impliedly repealed with effect from 01.07.2017 i.e., the date on which CGST Act, 2017 has come into effect.

(e) Consequential to the prayers above, have sought for refund of the NCCD collected by the respondents with effect from 01.07.2017 till date.

3. In W.P.No.3810/2021, apart from the above prayers, petitioner has sought for quashing of show-cause notice dated 29.09.2020.

II. CONTENTIONS OF PETITIONERS:

Issue for Consideration:

4. The petitioners have put forth the following issues for consideration (as per submissions of petitioner filed on 05.10.2021) :

(1) Whether after coming into force of the Constitution (101st Amendment) Act, with effect from 01.07.2017 the levy of basic excise duty and NCCD is constitutionally valid?

(2) Whether simultaneous levy of GST under Article 246A of the Constitution of India and levy of basic Excise duty and NCCD under Article 246 qua tobacco and tobacco products is legally permissible?

(3) Whether such simultaneous levies would be consistent with purposive and harmonious construction of the Constitution?

Propositions relied on by the Petitioners:

5. In support of the aforesaid issues raised, petitioners have relied on the following propositions:

(i) The introduction of the Constitution (101st Amendment) Act, 2016 and consequent enactment of the four GST Acts with effect from 01.07.2017 was to avoid cascading effect of taxes and providing for a Common National Market for Goods and Services.

(ii) The Goods and Services Tax is a single tax which subsumes various existing taxes levied at each stage o

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