2022 (12) TMI 1331 - HC - Central Excise

Validity of Rule 5 Confirmed: Manufacturers Bound by Composition Scheme Cannot Claim Capacity Determination

K.P. Steels Limited, Versus The Commissioner of Customs and Central Exise,

The High Court upheld the validity of Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 under Section 3A of the Central Excise ... Constitutional Validity of provisions of Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 - ultra vires the provisions of Section 3A of the Central Excise and Salt Act, 1944 or not - violative of Article 14 of the Constitution of India or not - HELD THAT:- It has been brought to the notice of this Court that the issue involved in the present writ petition is covered by the decision of the Supreme Court in COMMISSIONER OF C. EX. & CUSTOMS VERSUS VENUS CASTINGS (P) LTD. [2000 (4) TMI 37 - SUPREME COURT] where it was held that If the entire enactment is read as a whole indicates the purpose and that purpose is carried out by the rules, the same cannot be stated to be ultra vires of the provisions of the enactment. Therefore, it is made clear that the manufacturers, if they have availed of the procedure under Rule 96ZO(3) at their option, cannot claim the benefit of determination of production capacity under Section 3A(4) of the Act which is specifically excluded. The present writ petition is disposed off. Issues:Challenge to the validity of Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 under Section 3A of the Central Excise and Salt Act, 1944 and Article 14 of the Constitution of India.Analysis:The petitioners filed a writ petition seeking a declaration that Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997 is ultra vires Section 3A of the Central Excise and Salt Act, 1944, and unconstitutional, arbitrary, and violative of Article 14 of the Constitution of India. The issue was brought before the High Court, which noted that a similar issue had been addressed by the Supreme Court in the case of Commissioner of Central Excise & Customs v. Venus Castings (P) Limited. The Supreme Court decision highlighted the provisions of Section 3A of the Act, which allows charging excise duty based on production capacity for certain goods. The Court explained the procedure for determining annual production capacity and the payment of duty under Rules 96ZO and 96ZP for different manufacturers. It emphasized that the procedures under Section 3A(4) of the Act and Rule 96ZO(3) are alternative and cannot be combined. The Court rejected the contention that Rule 96ZO(3) is contrary to Section 3A(4) and held that the purpose of the Act is to levy tax based on production of goods. The Court also referred to decisions by other High Courts to support its reasoning.The High Court concluded that manufacturers who opted for the procedure under Rule 96ZO(3) could not claim the benefit of production capacity determination under Section 3A(4) of the Act. It overruled the view taken by the Allahabad High Court in a previous case. The Court emphasized that once a composition scheme is availed by an assessee, they cannot request regular assessment later. Therefore, the writ petition challenging the validity of Rule 5 was disposed of based on the Supreme Court decision and the reasoning provided by the High Court. The miscellaneous applications pending were closed with no order as to costs.