Delegated fiscal rule on annual capacity determination upheld as consistent with revenue protection and non-discriminatory under Article 14.

Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 was considered within the rule-making power under Section 3A of the Central Excise Act, 1944 because the parent provision left the method of capacity determination to delegated rules. The Court held that deeming annual capacity to be actual production where the formula yielded a lower figure was a permissible fiscal adjustment aligned with the scheme's revenue-protective object and not an excess of delegated power. The Article 14 challenge also failed, as taxation measures permit broader classification and the rule had a rational nexus with preventing revenue leakage and ensuring proper levy; harsh operation in individual cases did not make it discriminatory.

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Issues: Whether Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 was ultra vires Section 3A of the Central Excise Act, 1944 and whether it violated Article 14 of the Constitution of India as discriminatory.

Analysis: Section 3A introduced a special levy scheme for notified goods on the basis of annual capacity of production, with the detailed method of determination left to delegated rule-making. Rule 5 provided that where the capacity determined by the formula was lower than the actual production of the base year 1996-97, the actual production would be deemed to be the annual capacity. The Court held that this did not travel beyond the scope of the parent provision, because the entire determination mechanism was delegated to rules and Rule 5 merely adjusted the capacity determination to actual production in a manner consistent with the revenue-protective object of the scheme. On the Article 14 challenge, the Court held that taxation measures permit a wider field of classification, and the impugned rule had a rational nexus with the object of preventing revenue leakage and ensuring proper levy. The mere fact that the rule could operate harshly in individual cases did not make it constitutionally invalid. The Court also rejected the objections based on res judicata and estoppel.

Conclusion: Rule 5 was upheld as intra vires and not violative of Article 14. The challenge to the rule failed.

Ratio Decidendi: A delegated fiscal rule fixing duty liability by reference to actual production, where the parent statute leaves the method of capacity determination to rules, is not ultra vires if it advances the statutory object and bears a rational nexus to revenue protection; differential impact in taxation does not by itself establish discrimination under Article 14.

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