Court upholds constitutionality of excise duty on tobacco post-GST, rejects refund claim.

The court dismissed the petitions, upholding the constitutionality of the levy of basic excise duty and National Calamity Contingent Duty (NCCD) on tobacco products post the GST regime. The court affirmed that the simultaneous levy of GST and excise duty/NCCD is legally permissible and consistent with the constitutional framework. The court also rejected the petitioners' claims for a refund of NCCD collected from 01.07.2017 and the quashing of the show-cause notice dated 29.09.2020.

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Issues Involved:
1. Constitutionality of the levy of basic excise duty and National Calamity Contingent Duty (NCCD) post the Constitution (101st Amendment) Act, 2016.
2. Simultaneous levy of GST and excise duty/NCCD on tobacco and tobacco products.
3. Consistency of simultaneous levies with the purposive and harmonious construction of the Constitution.
4. Refund of NCCD collected from 01.07.2017 till date.
5. Quashing of show-cause notice dated 29.09.2020.

Detailed Analysis:

Power Under Article 246 R/W Entry 84 List I Post the GST Regime and Introduction of Article 246A of the Constitution of India:
The court analyzed the introduction of Article 246A, which confers simultaneous power to levy GST on goods and services, and the restructuring of Entry 84 of List I, which continues to allow the levy of excise duty on tobacco products. The court emphasized that the non-obstante clause in Article 246A does not abrogate the power under Article 246. The phrase "notwithstanding anything contained in Article 246" clarifies that Article 246A operates alongside Article 246 without impeding it. The court referred to precedents like South India Corporation Pvt. Ltd. v. Secretary, Board of Revenue and Chandravarkar Seetharathna Rao v. Ashalatha S. Guram to support this interpretation. The court concluded that the power under Article 246 remains protected and that the restructuring of Entry 84 was a conscious decision to preserve this power even after the introduction of Article 246A.

Taxing on Taxable Event, Aspect Theory and Subsumation of Manufacture in Supply:
The court addressed the petitioners' contention that the concept of supply subsumes manufacture under the GST regime, which would make the levy of excise duty on the same taxable event unconstitutional. The court referred to Union of India v. Mohit Mineral (P) Ltd., which stated that the Constitution (101st Amendment) Act, 2016 does not bar the levy of surcharge even if various taxes are subsumed. The court emphasized that double taxation is not inherently invalid unless explicitly prohibited. The court also discussed the Aspect Theory, which allows different aspects of a single subject to be taxed independently. The court concluded that the levy of excise duty and GST on tobacco products is on different legal aspects (manufacture vs. supply) and does not result in unconstitutional overlapping.

Legality of Levy of NCCD as per Section 136 of the Finance Act, 2001:
Section 136 of the Finance Act, 2001, which provides for the levy of NCCD as a surcharge by way of duty of excise, was upheld. The court referred to The Madurai District Central Co-operative Bank Ltd. v. The Third Income Tax Officer, Madurai, which clarified that surcharge is a distinct charge independent of the duty of excise. The court concluded that the levy of NCCD is valid and independent of the levy of basic excise duty.

NCCD as a Surcharge and Article 271:
The court examined Article 271, which allows Parliament to increase duties or taxes by a surcharge for the Union's purposes. The court clarified that the surcharge under Article 271 excludes GST under Article 246A but allows for other surcharges, such as NCCD. The court rejected the petitioners' interpretation that surcharge cannot be levied on goods subject to GST under Article 246A, affirming that the levy of NCCD is valid even if the goods are subject to GST.

Levy of NCCD During the Period of Exemption of Excise Duty:
The court rejected the petitioners' argument that the exemption of excise duty by Notification No.11/2017 should also exempt NCCD. The court referred to Unicorn Industries Vs. Union of India, which clarified that exemption of excise duty does not extend to NCCD. The court upheld the validity of NCCD during the period when excise duty was exempted.

Levy of Basic Excise Duty and NCCD is Violative of Article 14 of the Constitution of India:
The court addressed the petitioners' contention that the levy of basic excise duty and NCCD on tobacco products is discriminatory and violates Article 14. The court noted that the classification of tobacco products for additional taxation is based on intelligible differentia and rational nexus, such as discouraging consumption and revenue generation. The court referred to Commissioner of Urban Tax v. Buckingham & Carnatic Company Ltd. and ELEL Hotels & Investments Ltd. V. Union of India, which support the wide discretion of the legislature in tax matters. The court concluded that the levy of excise duty and NCCD on tobacco products does not violate Article 14.

Conclusion:
The court dismissed the petitions, upholding the constitutionality of the levy of basic excise duty and NCCD on tobacco products post the GST regime. The court affirmed that the simultaneous levy of GST and excise duty/NCCD is legally permissible and consistent with the constitutional framework. The court also rejected the petitioners' claims for a refund of NCCD collected from 01.07.2017 and the quashing of the show-cause notice dated 29.09.2020.

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