1991 (12) TMI 142 - SC - Central Excise

Court Validates Cess on Jute Yarn & Twine by Weight

The court upheld the levy of cess on jute yarn and jute twine, including captively consumed products, based on weight. It affirmed that jute yarn falls ... Whether Rule 3 of the Jute Cess Rules is a case of legislation by reference and that in such a case the provisions of the Central Excise Act and the rules made thereunder as they were obtaining on the date of making of Rule 3 continue in the same form, unaffected by subsequent amendments or changes in the Central Excise Act and Rules Held that:- the language of Rule 3 of Jute Cess Rules is altogether different. It indicates a continuing applicability of the provisions of the Central Excise Act and the Rules. What was levied was a ‘duty of excise’ and it was to be levied and collected in accordance with the provisions of the Central Excise Act and the Rules. The effect is as if the words “for the time being in force” were there after the words “the provisions of Central Excises and Salt Act, 1944 (1 of 1944) and the Rules made thereunder” in Rule 3. We are, therefore, of the opinion that the amendment of Rules 9 and 49 made in 1982 (with retrospective effect from 1944) is equally applicable in the matter of levy and collection of cess under the Act. The contentions urged by Shri Ganesan are accordingly rejected. Under the Schedule to the Central Excise Act, jute was taxed with reference to weight. So also was jute yarn; vide Entry 22A and 18D of the Schedule. Even the 1985 Act taxes jute and jute yarn by weight alone. The nature of the cess imposable under Section 9 is really that of duty of Central Excise, as emphasised hereinbefore. Evidently, for that reason the principle obtaining under the Central Excise Act has been adopted by this Act in the matter of levy of cess. We cannot agree with Shri Salve that according to Section 9, the cess can be levied on the basis of value alone and on no other basis. Appeal dismissed. Issues Involved1. Whether jute yarn falls within the purview of the Industries (Development and Regulation) Act, 1951.2. Whether the cess can be levied on intermediate products like jute yarn and jute twine captively consumed within the same factory.3. Whether the levy of cess under Section 9 of the Act can be based on weight instead of value.4. The applicability of amendments to the Central Excise Rules to the Jute Manufactures Cess Rules.Issue-Wise Detailed Analysis1. Whether jute yarn falls within the purview of the Industries (Development and Regulation) Act, 1951.The appellant argued that jute yarn is not mentioned in Heading 23 of the First Schedule to the Act, unlike jute twine and jute rope, and thus should be outside the Act's purview. The court noted that the main heading under Heading 23 is 'Textiles,' which includes jute textiles. It was established that jute yarn is an intermediate product in the manufacture of jute textiles, and thus it falls within the purview of the Act. The court did not find significance in the omission of the word 'yarn' from the sub-heading in 1956, emphasizing that jute yarn is a product known to the market and is manufactured within the scheduled industry.2. Whether the cess can be levied on intermediate products like jute yarn and jute twine captively consumed within the same factory.The appellants contended that intermediate products captively consumed within the same factory should not attract cess. The court referred to Section 9 of the Act, which allows the levy of cess on all goods manufactured or produced in a scheduled industry. It concluded that jute yarn and jute twine, even if captively consumed, are goods manufactured in a scheduled industry and thus liable for cess. This conclusion was supported by the decision in J.K. Cotton Spg. & Wvg. Mills v. Union of India, which held that intermediate products consumed within the same factory can be subjected to duty.3. Whether the levy of cess under Section 9 of the Act can be based on weight instead of value.The appellants argued that the cess should be levied based on the value of the product, as indicated by the proviso to Section 9(1). The court found no merit in this argument, stating that the main limb of Section 9(1) does not specify any particular basis for the levy of cess. The court held that the Central Government could adopt a basis for levy, including weight, as long as it does not violate the ceiling prescribed by the proviso. The court noted that under the Central Excise Act, duties are levied not only ad valorem but also in other ways, including by weight.4. The applicability of amendments to the Central Excise Rules to the Jute Manufactures Cess Rules.The appellant argued that Rule 3 of the Jute Manufactures Cess Rules, which applies the provisions of the Central Excise Act and rules to the levy and collection of cess, should not incorporate subsequent amendments. The court disagreed, stating that Rule 3 indicates a continuing applicability of the provisions of the Central Excise Act and rules. The court concluded that the amendments to Rules 9 and 49 of the Central Excise Rules, made in 1982 with retrospective effect, are applicable to the levy and collection of cess under the Act.ConclusionThe court dismissed the appeals and writ petitions except for Civil Appeal arising from Special Leave Petition No. 5466 of 1980, which was allowed. The court upheld the levy of cess on jute yarn and jute twine, including those captively consumed within the same factory, and affirmed that the cess could be levied based on weight. The court also held that the amendments to the Central Excise Rules are applicable to the Jute Manufactures Cess Rules. No order as to costs was made.