A division bench of the Madhya Pradesh High Court has struck down clause 6.3 of the Trade Notice wherein the central excise officers are allowed to deny de-sealing of cigarette manufacturing machines and DG sets.
The division bench comprising Justice Vivek Rusia & Justice Amar Nath (Kesharwani) was considering a bunch of petitions wherein the department refused to de-seal the premises relying on the instructions as per the trade notice 40/95 dated 25.08.1995 whereby the instructions were given for the procedure to be followed for effective physical control of production Cigarettes in the factories. Vide instructions dated 24.12.2008, the duties and responsibilities of the range officers and Central Officer were fixed.
The petitioners argued that Rule 34 of the Central Excise Rules, 2017 gives power to Board or the Principal Chief Commissioner or Chief Commissioner, to issue written instructions for any incidental or supplemental matters, consistent with the provisions of the Act and rules. Therefore, the Excise authority gets jurisdiction to issue Trade Notices under the Act and rules but the only rider is that such written instructions in the Trade Notice should be consistent with the act and provision of the rules.
Allowing the above plea, the High Court held that “In our view, the above clause does not apply in the case of the petitioner as the impugned action of sealing was done under Trade Notice No.02/2015 dated 04.02.2015 which was applicable at the relevant point of time. But the respondents are denying the de-sealing of the machines and DG sets under Trade Notice dated 18.1.2021 hence we shall also examine the validity of the above clause of this latest Trade Notice. After hearing the learned counsel for the respondents who have failed to highlight any provision in the Excise Act and rules and even in the CGST Act which gives authority to the competent authority to seal the machines of a running manufacturing unit. Hence above clause 6.3 is wholly unreasonable and inconsistent with the provision of the Central Excise Act and Rules and liable to be struck down.”
“The Central Excise Authorities cannot compel any manufacturer to utilize 50% of the machine hours in shift based on the declared capacity of the machine. The production of any goods always depends on demand in markets, availability of raw material, availability of electricity, manpower, working capital etc. The only provision under the Excise Act is section 3A under which the Central Government can charge the excise duty on the basis of capacity of production in respect of notified goods and admittedly, the cigarette is not notified goods under Section 3A, therefore, apart from Section 3A, Shri Prasad has failed to point out any provision under the Act and Rules under which the Central Government can insist the manufacture to operate the machine up to 50% of its total production capacity machine hours. Hence, condition No.6.3 is liable to be struck down,” the Court said.
While concluding the order, the Court added that “the machine and two DG sets of the petitioner are under seal since the date of the raid and now more than two years have lapsed still the respondents are not ready to release them. The petitioner is unable to do the production, this has not only caused business loss to the petitioner but to the Central Government also in respect to the revenue. The impugned action of the respondents is wholly without jurisdiction for which the petitioner is liable to be compensated, hence instead of assessing losses caused in this writ petition, we leave it to the petitioner to take recourse available under the law against the respondents. As far as loss of revenue to the Government is concerned, the higher officials of the respondents shall take appropriate action against the responsible officers.”
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