TaxTMI 
TaxTMI 
2017 (4) TMI 332
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.... of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (for short, 'the Act'). 3. The Central Government in exercise of the powers conferred under Section 3A of the Central Excise Act, 1944 (for short, 'the Excise Act') published a Notification on 27th February, 2010 notifying Chewing Tobacco as notified goods. As a consequence of such Notification, the levy and collection of the excise duty was to be done in accordance with the provisions of Section 3A of the Excise Act. In terms of the Rules so notified, the levy and collection of the excise duty on the goods in question was to be done not on the basis of the actual production by the manufacturing unit, rather it was to be done on the basis of total manufacturing capacity of the unit. The total manufacturing capacity was dependent upon number of packing machines installed in the factory by the manufacturers. The rates of duty as per packing machines per month was initially prescribed vide Notification published on 27th February, 2010, but subsequently, another Notification was issued on 24th January, 2014 prescribing ....
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....od of 15 days or more, then the 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. It is also pointed out that vide Notification dated 27th February, 2010, the factor relevant to production of the notified goods have been made as the number of packing machines in the factory of the manufacturers. However, by the amendments carried out vide Notification dated 1st March, 2015, not only the number of packing machines, but the maximum packing speed have also been inserted as a relevant factor for determination of the production capacity. It is also pointed out that Section 3A of the Excise Act provides for alternative schemes of levying duty for specifically notifying certain goods/class of goods. Such scheme is in respect of excisable commodities which are evasion prone and, therefore, instead of levying excise duty on the basis of quantum of production, the power of levy of excise duty under this provision is for notified goods on the basis of relevant factors of production. The rationale for notification of such goods is to prevent evasion of duty. The Scheme of the Act a....
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....those honest tax payers will continue to pay the excise duty on the basis of the factors of production de hors the actual production. 8. It is further stated that the Government of India has considered all the relevant factors for the purpose of fixing the deemed quantity of production, such as the number of packing machines, the maximum packing speed at which such packing machines can be operated, number of shifts run in the industry, number of working days, number of pouch and size of packages in a day, which has direct bearing with the manufacture of quantity of products and which is in normal course of business linked to the maximum retail price of the product. It is also pointed out that Chewing Tobacco and Unmanufactured Tobacco are non-merit goods and also because of hazardous impact on health of citizens, its consumption and use is also to be discouraged. Therefore, the legislative intent and policy are very clear with respect to such goods and that the levy of excise duty has been raised from time to time. 9. The petitioner has filed rejoinder reiterating its stand in the writ application. The petitioner has also filed a supplementary affidavit appending co....
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....Assistant 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 during a part of the year only, the annual production thereof shall be calculated on proportionate basis of the annual capacity of production : Provided further that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be re-determined on a proportionate basis having regard to such alteration or modification. (3) The duty of excise on notified goods shall be levied, at such rate, on the unit of production or, as the case may be, on such factor relevant to the production, 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 fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fu....
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....g machines in the factory of the manufacturer and the maximum packing speed at which such packing machines can be operated for packing of notified goods of various retail sale prices."; (ii) in rule 5, - (a) for the portion beginning with the words "The quantity of notified goods" and ending with the words "as the case may be", the following shall be substituted, namely :- "The quantity of notified goods, having retail sale prices as specified in column (2) of Table-1 or Table-2 below, deemed to be produced by use of one operating packing machine, having maximum packing speed at which it can be operated for packing of notified goods as specified in column (3) or column (4) or column (5) of the said Table-1, or column (3) or column (4) of the said Table -2 , as the case may be, per month shall be as is equal to the corresponding entry specified in column (3a) or column (3b) or column (4a) or column (4b) or column (5) of the said Table-1, or column (3) or column (4a) or column (4b) of the said Table -2, as the case may be". 13. Rule 6(5) of the Rules notified on 27th February, 2010 contemplates that the machines which the manufacturer does not intend to ope....
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....nother judgment of the Hon'ble Supreme Court reported as (1995) 3 SCC 23 = 1995 (76) E.L.T. 241 (S.C.) (Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad) to contend that the goods are liable to excise duty only if they are marketable or capable of being marketed. Therefore, the imposition of compound levy on the manufacturing capacity of a manufacturer without ensuring that the goods manufactured are marketable commodity or not is not sustainable in law. 17. We have heard learned counsel for the parties and find no merit in the present writ petition. In Indian Express Newspapers' case (supra), the imposition of import duty has the direct effect of crippling the freedom of speech and expression guaranteed by the Constitution as it has led to the increase in the price of newspapers and the inevitable consequence of reduction of their circulation. Though the learned counsel for the petitioner relied upon Paragraph 75 of the judgment wherein it has been observed that subordinate legislation may also be questioned on the ground that it is unreasonable not in the sense of not being reasonable, but in the sense that it is manifestly arbitrary. The argument is tha....
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.... which the Court considers relevant." (Emphasis supplied) 18. Thus, even the judgment referred to by the learned counsel for the petitioner does not support the argument raised as there is no challenge to the Notifications on the ground that it is contrary to statutory provisions. Challenge is not on the ground that it is beyond legislative competence of the Central Government. What is alleged is that it is arbitrarily violative of Article 14. It has been held that the subordinate legislation cannot be questioned on the ground of violation of principles of natural justice on which administrative action may be questioned. The Court drew distinction between the delegation of legislative function in which the question of reasonableness cannot be enquired into and the investment by statute to exercise particular discretionary powers. It is only in the case of investment by statute to exercise particular discretionary powers, the question may be considered in all grounds on which administrative action may be questioned, otherwise, a subordinate legislation may be struck down if it fails to take into account very vital facts which either expressly or by necessary implication a....