TaxTMI 
TaxTMI 
2006 (7) TMI 644
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....l Application No.8388 of 2003 [Raghuvir Synthetics Ltd. vs. Union of India] and Special Civil Application No.8389 of 2003 [B. Santumal Textile Mills Pvt. Ltd. vs. Union of India] are the petitions by the Textile Industries, which are challenging the vires of Rule-3 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 ("the Hot Air Stenter Rules" for short), the Rules framed under Section-3A of the Act. 3. The first three petitioners are engaged in the business of re-rolling of steel, while the other two are engaged in the manufacture of synthetic/textile fabrics. 4. The learned Counsel for the petitioners firstly submits that Section-3A of the Central Excise and Salt Act, 1944 is ultra vires the Constitution, especially, Entry 84 of the Union List of the Seventh Schedule of the Constitution. The submission is that levy can be effected on the goods produced or manufactured by an industry and not on hypothetical basis or on some formula, which does not relate to manufacture or produce. He submits that Section-3A provides levy of the duty on the basis of the capacity of production and as such, it is bad. It is further submitted that the rul....
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....ich such goods are produced, by the Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory : Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production. (3) The duty of excise on notified goods shall be levied, at such rate as the Central Government may by notification in the Official Gazette specify, and collected in such manner as may be prescribed : Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfills such conditions as may be prescribed. (4) Where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine....
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....oduction of the factory in which such goods are produced and such annual capacity of production shall be deemed to be the annual production of such goods by such factory. This exercise of fixing the annual capacity is to be undertaken by the Commissioner of the Central Excise. 6.2 According to Sub.section-(3), the duty of excise on notified goods shall be levied at such rate as the Central Government may by notification in the Official Gazette specify, and it may be collected in such a manner as may be prescribed. The proviso appended to Sub.section-(3) provides that where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfills such conditions as may be prescribed. 6.3 Sub.section-(4) provides that where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under Sub.section (2), he can apply to the Commissioner of Central Excise and the Commissioner, after giving an opportunity to the assessee to produce evidence in sup....
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....urpose of the Act. In holding whether a relevant rule to be ultra vires it becomes necessary to take into consideration the purpose of enactment as a whole, starting from the preamble to the last provision thereto. 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. .... " These observations made by the Supreme Court are clear in terms when they say that Section-3A of the Excise Act is a mode of charging the duty in a different manner. The observations of the Supreme Court that the charge under the Section is clearly on production of the goods but the measure of the tax is dependent on either actual production of goods or on some other basis, which are to be understood in their true spirit and for the reasons for which those have been laid. Once the Supreme Court says that Section-3A proposes levy on actual production and not on hypothetical basis or otherwise, then, it cannot be said that the section is ultra vires the Constitution. 9. Section-3A (2) of the Central Excise Act provides for determination of the annual capacity and levy of the d....
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....erred to in sub-rule (3, to the Commissioner of Central Excise (hereinafter referred to as the Commissioner), with a copy to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise; (2) on receipt of the information referred to in sub-rule (1), the Commissioner shall take necessary action to verify their correctness and ascertain the correct value of each of the parameters. The Commissioner may, if he so desires, consult any technical authority for this purpose; (3) the annual capacity of production of hot re-rolled products of non-alloy steel in respect of such factory shall be deemed to be as determined by applying the following formula:- Annual Capacity = 1.885 x 10 4 x d x n x i x e x w x Number of utilised hours (in metric tonnes) xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx" 12. According to Rule-2 of the said Rules, the rule shall apply to non-alloy steel hot re-rolled products falling under sub-heading Nos.7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 of the Schedule to the Central Excise Tariff Act, 1985 for determining the annual capacit....
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....ginal capacity of a twenty years' old machine was similar to a new machine, then, the annual capacity cannot be decided on the strength of the basic capacity of the said machine, but, still have to be decided after taking into consideration various factors such as age of the machine, the manner in which it is placed and at what rate, it is producing the goods. 15. When we asked the learned Counsel that if `n' denotes nominal rotations per minute of the drive, then, such rotations per minute in the new and old machine would be different and if the informations are to be supplied by the manufacturer himself, then, how the rule is not workable, the learned Counsel went on repeating that the formula is vague, the nominal rotations in old and new machines are different, therefore, the same would obviously affect the production. When we again asked the learned Counsel that if the facts and figures or the full details are to be supplied by the manufacturer himself and if the manufacturer knows that the old machine's production capacity is worn out or is reduced or is decreased by lapse of time, and such facts are found to be correct, then, obviously, the Commissioner would de....
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....the matter of Beauty Dyes (supra) is concerned, we are unable to agree with the reasonings given in the said judgement. The learned single Judge in the said matter has placed his reliance upon two Supreme Court's judgement, one was relating to levy of tax on the land and building, while the other one was dealing with the property tax on textile mills and factories. The said two judgements have nothing to do with the production capacity. In paragraph-12 of the said judgement, the learned Judge has observed that the Government had not tried to fix the formula to determine the production capacity on the basis of the quantity of production, but, on the basis of the value fixed by the Central Government by themselves irrespective of the capacity of the factories concerned. The said observations, in our humble opinion, run contrary to Rule-3 of the Re-rolling Steel Rules, so also the Hot Air Stenter Rules. Section-3A read with the Rules are themselve a complete code when they provide that the annual production capacity can be determined on a particular formula and duty can be levied on the strength of the annual production capacity. 18. When somebody installs a machine or founds a f....
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....the authority runs contrary to the judgement of the Supreme Court and Section-3A was omitted from the Statute Book on 11th May, 2001 and Rules 96(ZO), 96(ZP), 96(ZR) were repealed/withdrawn with effect from 1st March, 2001 and as there is no saving clause, no action can be taken either under Section-3A or under the said Rules. 22. So far as the second submission is concerned, there are no pleadings to that effect. When we pointed out this fact to the learned counsel, he submitted that he has exchanged pleadings with the Counsel for the Central Government. We are astonished and we must say, we are amused by this submission. Exchange of pleadings or exchange of arguments between the two Counsel is on the other side and any decision by them would not bind the Court. The Court does not decide any question unless it is properly raised by way of pleadings and submissions at the time of arguments. It is trite that no arguments would be heard by the Court unless there are some pleadings to support the said arguments. 23. So far as the question of correctness of the order passed by the authority is concerned, we shall not enter into the same because by challenging the vires on flimsy grou....
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....ot to be measured by abstract symmetry'; `that exact wisdom and nice adaption of remedy are not always possible' and that `judgment is largely a prophecy based on meagre and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The Court cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Co., (1950) 94 L Ed 381, be converted into tribunals for relief from such crudities and inequities. .... If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues." The learned Counsel for the petitioners submitted that the Commissioner may decide t....