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High Court Of Delhi
SUPREME STILS AND GENERAL MILLS - Appellant
Versus
UNION OF INDIA - Respondent
C.M. 6758 of 1997
Decided On : 10/28/1997
CENTRAL EXCISE ACT - SECTION 3A - MODVAT CREDIT - LAPSE OF CREDIT - VALIDITY OF SECTION 3A - DISCRIMINATORY NOTIFICATIONS - INTERIM RELIEF: Stay of operation of impugned rules and notifications granted.
Fact of the Case:
Petitioners challenged the validity and vires of Section 3a of the Central Excise Act, 1944, along with various notifications issued thereunder. They contended that the lapse of modvat credit already earned by manufacturers was retrospective in nature and beyond the rule-making powers of the Government. They also argued that the impugned rule of lapsing credit on specified commodities only was discriminatory and violative of Article 14 of the Constitution of India.
Finding of the Court:
The court held that the petitioners had a strong prima facie case for grant of interim relief. It found that the impugned rule of lapsing modvat credit was retrospective in nature and beyond the rule-making powers of the Government. The court also found that the impugned notifications were discriminatory and violative of Article 14 of the Constitution of India.
Issues: 1. Whether the lapse of modvat credit already earned by manufacturers was retrospective in nature and beyond the rule-making powers of the Government? 2. Whether the impugned rule of lapsing credit on specified commodities only was discriminatory and violative of Article 14 of the Constitution of India? 3. Whether the impugned notifications were discriminatory and violative of Article 14 of the Constitution of India?
Ratio Decidendi: 1. The court held that the lapse of modvat credit already earned by manufacturers was retrospective in nature and beyond the rule-making powers of the Government because it took away a vested right acquired under the existing law and created a new disability in respect of transactions or considerations already past. 2. The court held that the impugned rule of lapsing credit on specified commodities only was discriminatory and violative of Article 14 of the Constitution of India because it was not based on relevant criteria and was purely whimsical. 3. The court held that the impugned notifications were discriminatory and violative of Article 14 of the Constitution of India because they were arbitrary and superfluous in their working and nature.
Final Decision: The court granted interim relief to the petitioners by staying the operation of the impugned rules and notifications.
( 1 ) SINCE common questions were involved in a number of writ petitions, we proceeded to hear arguments in these cases and sought assistance from all Counsel appearing in various matters.
( 2 ) ARGUMENTS of both the parties were heard at some length. In these cases, challenge has been laid to the validity and vires of Section 3a of Central Excise Act, 1944 apart from Notification Nos. 24/97,30 to34/97,57/97and58/97and all other connected notifications. In addition, the petitioners have also made a grievance of the scheme whereby modvat credit standing to the credit of various petitioners to the with drawal of modvat credit w. e. f. 1. 8. 1997. Notonly that, by that very scheme/ decision, respondent No. 1 has deprived the petitioners of the modvat credit already accrued and available to them. The lapse of the modvat credit in the account of assessees is in the nature of giving retrospective effect to the said notification whereby the credit already earned is sought to be taken away. In the original Act prior to enactment of Section 3a, the charging section imposed liability to excise duty on the goods manufactured which was in consonance with Entry No. 84 in List I of Seventh Schedule of the Constitution of India. Although the petitioners have raised important questions of law, as would appear from what is observed hereinafter. We are confining our order only to interim relief, sought by the petitioners in these petitions except C. W. P. Nos. 1231 /96 and 1400/96 wherein no application for interim relief is pending, as our Bench is breaking on 5. 11. 1997 and Diwali festival intervening in between, we are not left with enough time to hear arguments in the main petitions.
( 3 ) AFTER the arguments had been heard and the matter had been posted for orders, an application was received in C. W. P. No. 3490/97 whereby petitioners Nos. 1,2 and5 have prayed for withdrawing from the writ petition. The said prayer. has since been allowed by a separate order. In the circumstances, this order in respect of C. W. P. No. 3492/97 is confined only to petitioner Nos. 3 and 4.
( 4 ) BEFORE we proceed to consider various contentions, it will beappropriate to notice certain provisions of law as under:
"entry No. 84 in Seventh Schedule of Constitution of India. Duties of excise on tobacco and other goods manufactured or produced in India except. . . . . . . . . " (emphasis supplied)SECTIONS 3 and 3a of the Central Excise Act, 1944 read as under :
"3. Duties specified in the First Schedule to be levied- (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and duty on salt manufactured in, or imported by land into, any part of India as and at the rates, set forth in the Schedule to the Central Excise Tariff Act, 1985. Provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured- (i) in a free trade zone and brought to any other place in India; or (ii) by a hundred per cent, export-oriented undertaking and allowed to be sold in India, shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962), on like goods produced or manufactured outside India if imported into India, and where the said duties of customs arc chargeable by reference to their value, the value of such excisable goods shall, "ga Power of Central Government to change excise duty on the basis of capacity of production in respect of notified goods. (1) Notwithstanding anything confirmed in Section 3, where the Central Government having regard to thenature 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 factorsas may be relevant, is of the opinion that it is necessary safeguard the interest of reve
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