Monthly capacity-based cess includes newly operational machines, while abatement remains confined to installed machines continuously inoperative for the prescribed period.

Monthly capacity-based cess computation under Rule 12(4) is described as requiring reference to the highest number of machines installed on any day of the month, consistent with the statutory framework based on installed operational machines, rated speed and packed-goods weight. The notes state that this treatment covers machines installed and operated during the month without charging cess on non-existent machines. Proportionate abatement is described as available only where an installed machine remains continuously inoperative for at least fifteen days; it does not cover the period before a newly added machine was installed and became operational.

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Issues: (i) Whether Rule 12(4) of the Health Security Se National Security Cess Rules, 2026, requiring cess computation based on the maximum number of machines installed on any day in a month, is ultra vires the charging and computation scheme, Schedule II, and Articles 14 and 19(1)(g) of the Constitution of India; (ii) Whether cess on machines installed and made operational during the month is proportionately abatable for the period before their installation.

Issue (i): Whether Rule 12(4) of the Health Security Se National Security Cess Rules, 2026, requiring cess computation based on the maximum number of machines installed on any day in a month, is ultra vires the charging and computation scheme, Schedule II, and Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: Sections 4 and 5, read with Schedule II, establish a capacity-based cess regime in which the monthly levy is determined by the installed operational machines' maximum rated speed and the weight of the goods packed. Rule 12(4) operates with Rule 12(1), and its direction to adopt the maximum number of machines installed on any day in the month is linked to the monthly computation of cess under Schedule II. The rule does not impose cess on non-existent machines; it includes machines installed and used for manufacture during that month within the monthly capacity-based computation. A subordinate rule is invalid only where it conflicts with the parent enactment, exceeds delegated authority, infringes constitutional limitations, or is manifestly arbitrary. Rule 12(4) conforms to the statutory object of charging cess on production capacity represented by installed operational machines during the month.

Conclusion: Rule 12(4) is not ultra vires Sections 4, 5 or 35, Schedule II of the Health Security Se National Security Cess Act, 2025, or Articles 14 and 19(1)(g) of the Constitution of India. This issue is against the assessee.

Issue (ii): Whether cess on machines installed and made operational during the month is proportionately abatable for the period before their installation.

Analysis: Section 5(7) allows proportionate abatement only where a machine remains inoperative continuously for at least fifteen days. This applies to a machine that, after installation, remains non-operative; it does not extend to a machine newly installed later in the month and thereafter operated. The machines in question were operational upon installation, and their prior non-existence cannot be treated as inoperativeness through a deeming construction. The statutory exception for a newly registered person does not alter the treatment prescribed under Rule 12(4) for an existing registered person adding machines during a month.

Conclusion: No proportionate abatement is available for the period preceding installation of machines that were installed and operational during the month. This issue is against the assessee.

Final Conclusion: The monthly cess computation validly includes machines installed and operated at any time during the relevant month, and the statutory abatement mechanism is confined to installed machines that subsequently remain inoperative for the prescribed continuous period.

Ratio Decidendi: In a monthly capacity-based cess regime, a rule requiring computation with reference to the maximum number of machines installed during the month is valid where it accords with the parent statute's production-capacity framework; abatement for inoperative machines cannot be extended to the pre-installation period of newly added operational machines.

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