Levy Includes Imposition, Assessment & Recovery: Madras HC Upholds Application of Excise Act to Recover Clean Environment Cess [Read Order]

In a recent ruling, the Madurai Bench of the Madras High Court held that the word “levy” under Section 83(7) of the Finance Act, 2010 includes imposition, assessment and recovery of Clean Environment Cess, and the Centre can apply Section 11A of the Central Excise Act, 1944 for recovery of unpaid or short-paid cess through a notification.

NLC India Limited, a Central Government undertaking producing lignite and peat, filed this writ petition challenging part of Notification No. 02/2010-CEC dated 22.06.2010. By this notification, the Centre declared that several provisions of the Central Excise Act, including Section 11A, will apply to Clean Environment Cess.

The petitioner challenged only the part applying Section 11A and sought a declaration that it was beyond Section 83(7) of the Finance Act, 2010. Clean Environment Cess was introduced under Section 83 of the Finance Act, 2010. Section 83(6) said rules shall prescribe the manner of assessment and collection.

Section 83(7) allowed the Centre to apply provisions of the Central Excise Act to the cess by notification. The Centre also framed Clean Environment Cess Rules, 2010, which mainly dealt with self-assessment and payment.

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Before the High Court, NLC argued that Section 11A is about recovery of duties not paid or short paid. It argued that recovery is part of “collection” and since Section 83(6) and Section 84 talk about assessment and collection through rules, Section 11A could not be brought in by a notification under Section 83(7), because Section 83(7) speaks only about “levy”.

The Additional Solicitor General opposed this and argued that both rule-making and notification powers are with the Central Government and the provisions should be read together by harmonious construction.

The Division Bench of Justice G.R. Swaminathan and Justice R. Kalaimathi observed that Section 83(7) works through incorporation by reference and it is different from rule-making under Section 84. The Court then held that “levy” has a wide meaning and includes assessment and recovery also.

The court relied on Supreme Court rulings like CCE v. National Tobacco Company and explained that levy is not only imposition but it covers assessment and collection too. The court observed that the Government had two options either make detailed rules for recovery or apply existing Central Excise Act provisions by notification.

The Government chose to borrow the excise recovery mechanism. Since “levy” includes assessment and collection, the notification applying Section 11A was held valid. The writ petition was dismissed with no costs.

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