Delegated taxation limits: deeming fiction cannot shift excise incidence or override the charging provision
A challenge that a delegated notification or explanation exceeds the rule-making power and conflicts with the charging provision is not a challenge to constitutional validity in the strict sense, so the High Court could examine it. The writ petition was also not barred by alternative remedies because the appellate and revisional authorities could not declare the notification ultra vires, making those remedies ineffective. On merits, the explanation to the exemption notification was struck down because it used a deeming fiction to treat footwear made by a small manufacturer as manufactured by another person merely due to branding or purchase, thereby shifting excise incidence away from the real manufacturer and beyond Rule 8(1) and Section 3. The consequential trade notice and demand notice fell with it.
Issues: (i) whether the High Court lacked jurisdiction under the amended constitutional provisions to examine the impugned notification as a question of constitutional validity; (ii) whether the writ petition was barred for non-exhaustion of the statutory appeal and revision remedies; and (iii) whether the explanation appended to the exemption notification was ultra vires Rule 8(1) and Section 3 of the Central excise law.
Issue (i): Whether the High Court lacked jurisdiction under the amended constitutional provisions to examine the impugned notification as a question of constitutional validity.
Analysis: The bar under the amended constitutional provisions applies where the challenge is directed to the constitutional validity of a Central law, that is, where the attack is that the law is repugnant to the Constitution or offends constitutional provisions. A challenge that a notification or delegated measure travels beyond the rule-making power or contradicts the charging provision is not a challenge to constitutional validity in that sense. The impugned notification was therefore examinable by the High Court.
Conclusion: The objection to jurisdiction failed and the High Court could examine the validity of the notification.
Issue (ii): Whether the writ petition was barred for non-exhaustion of the statutory appeal and revision remedies.
Analysis: The statutory remedies under the Central excise enactment could not afford effective relief because the departmental appellate or revisional authorities had no power to declare the notification ultra vires. A remedy that is merely formal, ineffective, or illusory does not constitute an adequate alternative remedy for the purpose of the writ bar.
Conclusion: The alternative-remedy objection failed and the writ petition was maintainable.
Issue (iii): Whether the explanation appended to the exemption notification was ultra vires Rule 8(1) and Section 3 of the Central excise law.
Analysis: Rule 8(1) empowered the Central Government only to exempt excisable goods from duty on specified conditions. The impugned explanation went further and, by a deeming fiction, treated footwear manufactured by a small manufacturer as having been manufactured by another manufacturer merely because the brand or trade name of that other person was affixed, or because the goods were purchased by that person. That shifted the incidence of excise duty from the real manufacturer to a non-manufacturer and was inconsistent with the charging scheme under Section 3, under which excise is levied on manufacture or production. The explanation therefore exceeded delegated power and could not stand.
Conclusion: The explanation in Notification No. 88/77 was ultra vires and liable to be quashed, along with the consequential trade notice and demand notice.
Final Conclusion: The writ petition succeeded in substance, the impugned deeming explanation was struck down, and the consequential departmental action founded on it was also set aside.
Ratio Decidendi: A delegated authority empowered only to grant exemption cannot, by an explanation or deeming provision, alter the charging incidence of a tax or treat a non-manufacturer as the manufacturer; a challenge on that ground is one of ultra vires of delegated legislation, not a challenge to constitutional validity.