1991 (1) TMI 140 - HC - Central Excise

Supreme Court Upholds Excise Duty Amendments, Emphasizes Legislative Competence

MC THAKUR Versus EXTRUSION PROCESSORS PVT. LTD.

The amendments to Section 2(f) and Tariff Item No. 27 in the Central Excises and Salt Act, 1944, and Tariff Item 8313.11 in the Central Excise Tariff Act, ... Central Excises & Salt Act, 1944 - Valuation Issues Involved:1. Constitutionality of amendments to Section 2(f) and Tariff Item No. 27 in the Central Excises and Salt Act, 1944, and Tariff Item 8313.11 in the Central Excise Tariff Act, 1985.2. Inclusion of the cost of lacquering and printing in the assessable value of aluminium collapsible tubes and rigid cans.3. Legislative competency of Parliament under Entry No. 84 in List I of Schedule VII to the Constitution of India.4. Application of Section 3 of the Provisional Collection of Taxes Act, 1931.Detailed Analysis:1. Constitutionality of Amendments:The learned Single Judge declared that the amendments to Section 2(f) and Tariff Item No. 27 in the Central Excises and Salt Act, 1944, and Tariff Item 8313.11 in the Central Excise Tariff Act, 1985, were unconstitutional, ultra vires, null, and void. The amendments purported to authorize the levy of excise duty on the process of lacquering and printing of aluminium containers, which the Judge found to be outside the legislative competence of Parliament. Consequently, the appellants were directed to refund the collected duty within three months.2. Inclusion of Cost of Lacquering and Printing:The respondents, a Private Limited Company, argued that the process of printing and lacquering aluminium collapsible tubes is a post-manufacturing process undertaken to facilitate the sale of the product as per customer instructions. They contended that the cost of these processes should not be included in the assessable value for excise duty purposes. The Gujarat High Court and a Single Judge of the Bombay High Court had previously upheld this view, stating that the cost of printing and lacquering cannot be included while determining the assessable value because it is a post-manufacturing process.3. Legislative Competency:The learned Single Judge held that the Parliament was not competent to amend the law under Entry No. 84 in List I of Schedule VII to the Constitution of India. The Judge opined that the process of lacquering or printing does not become 'manufacture' merely by including it in the definition of 'manufacture' under Section 2(f) of the Act and Tariff Item No. 27(f). However, this view was overturned by the Supreme Court in the case of M/s. Ujagar Prints v. Union of India, which held that the amendments were valid under Entry 84 and, alternatively, could be supported by Entry 97 in List I of Schedule VII. The Supreme Court emphasized a liberal interpretation of legislative entries, rejecting the narrow view taken by the Single Judge.4. Application of Section 3 of the Provisional Collection of Taxes Act, 1931:The respondents argued that even if the amendments were intra vires, the excise duty collected from June 18, 1980, to August 25, 1980, should be refunded as the Finance Bill became law only on August 25, 1980. They contended that the declaration under Section 3 of the Provisional Collection of Taxes Act, 1931, did not authorize the collection of additional duty from June 18, 1980. The Court disagreed, stating that the Provisional Collection of Taxes Act allows for immediate effect of provisions in Bills relating to the imposition or increase of duties. The amendments were intended to impose fresh duty on the process of printing and lacquering by treating it as part of the manufacture of aluminium collapsible tubes. Therefore, the inclusion of the cost of these processes in the assessable value from June 18, 1980, was justified.Conclusion:The appeal was allowed, and the impugned judgment dated July 23, 1987, in Writ Petition No. 1539 of 1981 was set aside. The petition was dismissed, and the respondents were ordered to pay the costs of the petition throughout.