TaxTMI 
TaxTMI 
1995 (7) TMI 79
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....le tax as and when they are sold. In addition to the above payment of sales tax, the petitioner was also paying a cess at the rate of 60 Paise per quintal for the copra crushed in the mill. The cess was levied under the Produce Cess Act, 1966 (Central Act 15 of 1966). Section 3(2) thereof provided for the levy and collection as cess a duty of excise as prescribed in the Schedule on copra consumed in any mill in India with a view to producing or manufacturing any goods therefrom. 3.The Act was enacted for the imposition of a cess on copra for the development of the coconut industry and for matters connected therewith. It came into force from 1-4-1979. Section 3 of the Act, which relates to the imposition of cess, runs as follows : "3. Imposition of cess. There shall be - (1) levied and collected as a cess, for the purposes of this Act, on copra consumed in any mill in India with a view to producing or manufacturing any goods therefrom, a duty of excise at such rate, not exceeding five rupees per quintal of copra, as the Central Government may, by Notification in the Official Gazette, specify : Provided that until such rate is specified by the Central Government, the d....
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....ng paid by it under the Produce Cess Act, 1966. According to the petitioner, the Act is illegal, ultra vires and beyond the competence of Parliament and also unconstitutional and therefore liable to be struck down. 6.Mr. S.V. Subramaniam, learned counsel for the petitioner, alleged that the Act under which the petitioner is required to pay duty of excise on the copra consumed in their mill, is ultra vires and beyond the legislative competence. Such a cess according to the learned counsel, is a tax on consumption and not a duty falling under Entry 84 of List I of the 7th Schedule of the Constitution. He further contends that Section 3(1) of the Act provides for levy and collection as cess on copra consumed in any mill in India with a view to producing or manufacturing any goods therefrom, a duty of excise at the rate prescribed, and that though the levy is stated to be a cess, it is in effect, a duty of excise. According to the learned Counsel for the petitioner, the petitioner does not manufacture copra but only purchases copra and consumes the same and as such, levy of excise duty under Section 3 of the Act on the copra consumed by the petitioner in its mills, is without ....
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....ough several contentions as above were taken in different form by the learned counsel for the petitioner, in essence, they pertain only to the legislative competence of the Parliament. 9.Contesting respondents 1 and 2 filed a counter affidavit signed by the Deputy Collector (Legal) in the Office of the Collector of Central Excise, Madras. It is submitted on their behalf that the Act is constitutionally valid and that none of the grounds put forward in the writ petition against the validity of the Act is sustainable in law. Learned counsel for the respondents has answered the contentions raised by the learned counsel for the petitioner which we will deal with later. 10.According to the learned counsel for the respondents, Entry 84 of List I of the Seventh Schedule, do not restrict the competency of the Parliament to impose duty only on the goods produced or manufactured in India. According to him, this Entry 84 in List I of the Seventh Schedule cannot be narrowly construed and that a legislative entry in a Constitution should be read in a broad sense unless there is any other entry in the Union or State List to limit. The tax in question, the Cess levied on the con....
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....ections in that Act made elaborate provision for the collection of the cess imposed by Section 3 of the Act, for the establishment of an Indian Coconut Committee and for other allied matters. An excise duty by way of cess on copra was thus being collected from 1944 onwards. The Indian Central Cotton Committee, the Indian Lac Cess Committee, Indian Central Coconut Committee and the Indian Central Oil Seeds Committee stood dissolved with effect from 1-4-1966 and therefore, the continuance of levy of cess on these products after 31-3-1966 was not legally possible. The Produce Cess Act, 1966, was accordingly passed to provide for the imposition of cess on certain produces including copra for the improvement and development of the methods of cultivation and marketing such produces and for such matters connected therewith. Section 3 of the Produce Cess Act, 1966, was in the following terms : Imposition of cess - "3. There shall be levied and collected as a cess, for the (1) purpose of this Act, on every produce specified in Column 2 of the First Schedule which is exported from any customs port to any port beyond the limits of India, a duty of customs at such rate, not exceeding the....
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.... of the coconut industry and for matters connected therewith. The cess proposed was to be credited in the first instance to the consolidated fund of India and such amount as was necessary for the proper functioning of the Coconut Development Board was to be allocated to the Board. Therefore, the Government of India decided to repeal the provisions of the Produce Cess Act to the extent to which they authorise a levy of cess on copra consumed in mills for the manufacture of other articles and to simultaneously pass a comprehensive legislation authorising for the imposition of a separate cess on copra. The Act came into effect from 1-4-1979 and as per Section 3, levy was made with effect from 1-4-1979. 15.In our opinion, the taxable event contemplated by the legislation is the manufacture of any goods by the consumption of copra in any mill in India. The petitioner, in our view, has erroneously assumed that the taxable event is the purchase of copra. As rightly contended by the learned counsel for the contesting respondents the quantification of the tax has been made with reference to the quantity of copra which is consumed in the manufacturing process but the excise duty is ....
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....le and therefore, within the legislative field of Parliament. 18.The next contention of the learned counsel for the petitioner is that Entry 52 of List II of the Seventh Schedule provides for taxes on the entry of goods into a Local area for consumption, use or sale therein, and as such tax can be levied only by the State Government under the above entry. This is not correct. It mainly provides for levying the local taxes like octroi, toll and sales tax and according to this entry, the levy and collection is being made at the entry point and not at the consumption point as contended by the petitioner. Hence, in our view, the petitioner's contention is incorrect. 19.As pointed out by the learned Addl. Central Govt. Standing Counsel, the amount collected as cess is credited first to the consolidated fund of India, from which it is allocated to the Coconut Development Board as and when it requires such allocation. When the Parliament has authority to collect cess, it has inherent power to distribute the amount so collected within the ambit of the Act and for the purpose for which cess is collected. It is nowhere stated in the Act that the excess amount in the consoli....
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....ich the parties were entitled to act and that it is not open to the Government to go back upon the said decision and demand cess for the period subsequent to 1-3-1986. It is also contended that by virtue of Section 3(4) of the Cess Act, Rule 8 of the Central Excise Rules is attracted among other provisions of the Central Excise Act and Rules and that Rule 8 empowers the Central Government to grant exemption on any excisable goods from the whole or any part of duty leviable on such goods. The Supreme Court rejected both the contentions and held that the repealing Act expressly provided in Section 13 that the cess due before the date of the said repeal but not collected shall be collected according to law as if the Cess Act is not repealed, which provision amounts to a positive affirmation of the intention of the parliament to keep such imposition alive and effective till the date of the repeal of the Cess Act. The Supreme Court further held that the Finance Minister's speech in the Parliament is not law and that the Parliament may or may not accept his proposal. 22.Coming to the argument based upon Rules 8 of the Central Excise Rules, read with Section 3(4) of the Cess Act,....