2015 (7) TMI 302 - HC - Central Excise

Court upholds constitutionality of Section 88 Finance Act 2004, dismisses writ petition challenging AED credit utilization.

CEAT Limited Versus. Union of India

CEAT Limited Versus. Union of India - 2016 (332) E.L.T. 481 (Bom.) Issues Involved:1. Constitutional validity of Section 88 of the Finance (No.2) Act, 2004.2. Classification and cut-off date of 1 April 2000 in Section 88 of the Finance (No.2) Act, 2004.3. Utilization of Additional Excise Duty (GSI) credit for payment of Basic Excise Duty (BED) and Special Excise Duty (SED).Detailed Analysis:1. Constitutional Validity of Section 88 of the Finance (No.2) Act, 2004:The petitioners challenged the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, arguing that it is violative of Article 14 of the Constitution of India. They contended that the classification made by this section, which disallows the utilization of the credit of Additional Excise Duty (GSI) paid before 1 April 2000 for the payment of BED and SED, but allows it for duty paid on or after 1 April 2000, is arbitrary and lacks rationale.2. Classification and Cut-off Date of 1 April 2000:The petitioners argued that the cut-off date of 1 April 2000 is arbitrary and should be 1 April 1996. They based this argument on the recommendations of the 10th Finance Commission and the Constitution (80th Amendment) Act, 2000, which amended Articles 270 and 272 of the Constitution effective from 1 April 1996. They claimed that the amendment should consider the retrospective effect of these constitutional amendments.3. Utilization of Additional Excise Duty (GSI) Credit:The petitioners utilized the accumulated credit of AED (GSI) for the payment of BED and SED on tyres cleared during March to May 2003. They argued that the amendment to Rule 3(6)(b) of the Cenvat Credit Rules, 2002, effective from 1 March 2003, allowed such utilization. However, the respondents contended that only AED (GSI) paid on or after 1 April 2000 could be utilized for this purpose, based on the clarification provided in the Finance Act, 2004.Judgment Analysis:Constitutional Validity:The court examined the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, and found no merit in the petitioners' arguments. The court held that the classification made by this section is not arbitrary and has a rational basis. The court emphasized that the choice of the cut-off date is within the legislative domain and does not violate Article 14 of the Constitution.Classification and Cut-off Date:The court observed that the classification and the cut-off date of 1 April 2000 were chosen based on the need for separate accounting of AED (GSI) before this date. The court noted that the amendment to the Constitution and the recommendations of the 10th Finance Commission were considered, but they did not mandate a retrospective effect from 1 April 1996 for the utilization of AED (GSI) credit. The court upheld the cut-off date of 1 April 2000 as rational and justified.Utilization of AED (GSI) Credit:The court found that the petitioners' utilization of AED (GSI) credit for the payment of BED and SED on tyres cleared during March to May 2003 was not in accordance with the law. The court noted that the amendment to Rule 3(6)(b) of the Cenvat Credit Rules, 2002, allowed such utilization only for AED (GSI) paid on or after 1 April 2000. The court upheld the respondents' contention that the petitioners' utilization of AED (GSI) credit for the period before 1 April 2000 was incorrect.Conclusion:The court dismissed the writ petition, upholding the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, and the cut-off date of 1 April 2000. The court found that the classification made by this section is rational and justified, and the petitioners' utilization of AED (GSI) credit for the period before 1 April 2000 was not in accordance with the law. The court discharged the rule and imposed no order as to costs.