2009 (6) TMI 666 - HC - Central Excise

Government Exceeded Authority in Rubber Cess Exemption Decision

The judgment concludes that the Union Government exceeded its authority by issuing a notification (Ext. P1) granting exemption from Rubber Cess, as it ... Validity of notification - cess - fixing the rate of cess on the Rubber produced in India and procured for export production by the Export Oriented Units (EOUs), Units in the Special Economical Zone (SEZ) and Units in the Export Processing Zone (EPZs) at “zero paise” per Kg. - Held that:- The fixation of “Zero paise per kilogram” as duty of excise leviable from certain class of manufacturers as Rubber cess will clearly amount to granting of exemption. It is evident that fixation of “Zero paise” is only an indirect method of granting exemption, which the Government knows that they could not do directly. Government themselves admitted that they had issued such a notification only by virtue of power conferred under Section 12(1) of the Act. But it is clear and evident that Section 12(1) of the Act does not empower the Government from issuing any order granting exemption to any category of estate owners or manufacturers from payment of the duty of excise. No other provisions in the Act empowers the Government from granting such an exemption. - Notification is issued beyond the power and competence of the Government and hence it is not sustainable. It is settled law that a policy decision cannot be permitted to contradict the provisions of the statute or its legislative object. Therefore the exemption granted through Ext. P1 which is in violation of the provisions of the Act, and its legislation object could not be held valid, even if it is issued as a policy decision taken by the Government, writ petition is allowed quashing the notification. Issues:Competence and jurisdiction of the Union Government to issue notification (Ext. P1) under the Rubber Act, 1947.Validity of Ext. P1 notification granting exemption from payment of Rubber Cess to certain industries.Compatibility of Ext. P1 with Article 14 of the Constitution of India.Impact of Ext. P1 on promotion of export of industrial rubber products.Legality of Ext. P1 as an executive order in line with the Rubber Act, 1947.Analysis:1. Competence and Jurisdiction of Union Government:The judgment delves into the authority of the Union Government to issue Ext. P1 under Section 12(1) of the Rubber Act, 1947. The Act empowers the Central Government to levy a duty of excise on rubber produced in India, but it does not explicitly grant the power to provide exemptions. The judgment emphasizes that the Act limits the Government's authority to fixing the rate of duty, not granting exemptions.2. Validity of Exemption Granted by Ext. P1:The petitioner challenges the validity of Ext. P1, arguing that granting exemptions based on the location of industries violates Article 14 of the Constitution of India. The judgment references legal precedents to establish that the duty of excise on rubber is linked to production within the country, and extending liability to manufacturers does not alter this fundamental principle.3. Impact on Export Promotion:Ext. P1 is defended as a measure to promote the export of industrial rubber products, aligning with the Government's Export and Import (EXIM) Policy. The respondents argue that the notification aims to boost India's status as an exporter, particularly benefiting Export Oriented Units (EOUs) and units in Special Economic Zones (SEZs). The judgment scrutinizes whether this policy aligns with the statutory framework and legislative intent.4. Legality as an Executive Order:The judgment explores the legality of Ext. P1 as an executive order, scrutinizing whether it adheres to the provisions of the Rubber Act, 1947. Citing legal principles, the judgment highlights that a policy decision, even in the form of an executive order, is subject to judicial review if it contravenes the Act's provisions or legislative objectives.5. Conclusion:After evaluating the contentions and legal precedents, the judgment concludes that Ext. P1, by fixing the duty at 'Zero paise per kilogram,' effectively grants an exemption that exceeds the Government's authority under the Rubber Act, 1947. It asserts that the Government lacks the competence to issue such exemptions and that Ext. P1 is unsustainable. Ultimately, the writ petition is allowed, quashing Ext. P1 notification.This detailed analysis of the judgment provides a comprehensive understanding of the legal issues surrounding Ext. P1 and the implications of the decision on the competence of the Union Government in issuing such notifications under the Rubber Act, 1947.