A Division Bench of the Delhi High Court ruled that Rule 8 of Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules 2010 (CTUT) not ultravires to Section 3A of the Central Excise Act, 1944 (CEA).
The issue arose out of the quantum of duty which the appellant / petitioner, Gopal Corporates LLP, was liable to pay in terms of the provisions contained in the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules 2010. The writ petition in addition seeks a declaration to the effect that Rule 8 of the CTUT Rules 2010 be declared ultra vires to Section 3A of the Central Excise Act and additionally being violative of Article 14 of the Constitution.
The appellant / petitioner contended that additional duty is liable to be levied on a proportionate basis and in conjunction with the days when the additional packing machines had actually been operated. They assail the stand of the respondents that in terms of the CTUT Rules 2010, duty liability is to be ascertained and calculated based on the maximum numbers of packing machines that may have operated during any day of a particular month. For the purposes of examining the challenge which stands raised, we deem it apposite to notice the following essential facts.
The Senior counsel who appeared for the appellant / petitioner had contended that the Second Proviso to Section 3A(2)(b) is a clear indicator of duty being levied on a proportionate basis. It was submitted that the said Proviso is an unequivocal embodiment of the intent of the Central Excise Act for duty being levied on a pro rata basis. It was his submission that if Rule 8 was to be understood in the manner as suggested by the respondents, the same would clearly be rendered ultra vires the aforesaid Proviso.
The Standing Counsel who appeared for the Revenue submitted that Rule 8 mandates that if any new machine is installed on any date during the month, it is to be considered as having operated for the entire month. It accordingly held that while the number of machines which would be deemed to have operated during the concerned months would have to be computed in accordance with the above, the appellant / petitioner would be liable to pay duty accordingly.
A Division Bench comprising Justices Yashwant Varma and Dharmesh Sharma observed that “The principal part of Rule 9 requires that the monthly duty be deposited by the fifth day of the same month. If the Rule were to stop at this point, there would clearly be a vacuum in case an additional packing machine were to be added to the production line after the fifth day of the said month. The Third Proviso to Rule 9 consequently cannot possibly be read as diluted the deeming fiction which stands embodied in Rule 8.”
“Accordingly, and for all the aforesaid reasons, we find ourselves unable to hold Rule 8 as being ultra vires Section 3A nor do we find any error in the view as expressed by the Tribunal while passing the order impugned” the Bench concluded.
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