Capacity based Excise Levy upheld as intra vires; rules permit machine based capacity determination and verification without interim relief.

Whether capacity based notifications and rules governing chewing tobacco packing machines exceed statutory power: the court applied the enabling principle that the legislature can prescribe factors and methods for capacity determination and held that identifying machine number and machine capacity, prescribing a formula tied to machine number, speed and retail price, and providing verification and determination procedures are within the legislative mandate. The rules were assessed against anti evasion objectives and standardization needs and were found prima facie intra vires and not manifestly arbitrary; no interim relief was granted.

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Issues: Whether Notification No. 04/2025-Central Excise dated 31.12.2025, Notification No. 04/2025-Central Excise (N.T.) dated 31.12.2025 and Notification No. 05/2025-Central Excise (N.T.) dated 31.12.2025 and the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection Duty) Rules, 2026 are ultra vires Section 3A of the Central Excise Act, 1944 and the Constitution of India.

Analysis: Section 3A of the Central Excise Act, 1944 empowers the Central Government to notify goods for capacity based excise duty and to frame rules specifying factors relevant to production and the manner for determination of annual production capacity. Rule 4 of the 2026 Rules identifies number of packing machines and maximum capacity of such machines as factors relevant to production and aligns with Section 3A(2)(b)(i) and (ii). Rule 5 prescribes a method based on machine number, speed and retail sale price to determine maximum capacity per machine per month; Rule 7 provides for verification including physical inspection and Rule 8 for passing determination orders. Challenges that the figures are arbitrary because they do not disclose working hours, shifts or man-days were considered against the legislative objective of curbing tax evasion under Section 3A. Precedents recognising capacity or machine-based levies and the need for standardization in similar industries were considered. The mandate for CCTV in Rule 16 was assessed in light of the objective to ensure compliance and prevent evasion.

Conclusion: The impugned notifications and the 2026 Rules are prima facie within the legislative mandate of Section 3A of the Central Excise Act, 1944 and are not manifestly arbitrary; no interim relief is granted to the petitioners. The determination and verification mechanisms provided in the Rules are not shown to render the statutory scheme otiose.

Ratio Decidendi: Where Section 3A of the Central Excise Act, 1944 authorises capacity based levy and empowers rule making to specify factors relevant to production and methods of capacity determination, rules that identify machine number and machine capacity as relevant factors and provide verification procedures are prima facie intra vires and not liable to interim suspension merely because prescribed figures or mechanistic formulas appear harsh absent demonstration of impossibility or manifest unreasonableness.

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