TaxTMI 
TaxTMI 
2001 (12) TMI 95
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....r which the Central Government was empowered to charge with excise duty on the basis of capacity of production in respect of notified goods. Under the said provision, notwithstanding anything contained in Section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of Section 3A of the Act. From the above said provision, it is clear that with respect to the notified goods, the Central Government can levy and collect excise duty on the basis of capacity of production. 3.Under Section 3A(2) of the Act, the Central Government is empowered to frame rules by issuing notification providing the manner for determination of the annual capacity of production of the factory and such annual capacity shall be deemed to be the annual production ....
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.... of chambers in each of the hot-air stenters; (iv) the total value of processed fabrics referred to in Rule 2, produced or manufactured in the preceding financial year; and (v) the total quantity of processed fabrics referred to in Rule 2, produced or manufactured in the preceding financial year; to the Commissioner of Central Excise (hereinafter referred to as the Commissioner), with a copy to the Assistant Commissioner of Central Excise. ……. the annual capacity of production of processed textile fabrics specified in Rule 2 in respect of a factory of an independent processor shall be determined keeping in view the following factors, namely :- (i) the number of chambers (of a hot-air stenter), each of which having a rail length of up to 3.05 metre on each side, installed in such factory shall be constructed as one chamber and any fraction exceeding such rail length of any such chamber shall be computed on a pro rata basis; (ii) …… (iii) for the....
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.... chamber per month." 6.Learned Senior Counsel appearing for petitioners submitted that under the Act, for the purpose of levying the excise duty, the Central Government must provide the rule for determination of annual capacity of the factory which shall be deemed to be the annual production of such goods by such factory. But, by framing the rules under Notification No. 42/98, no such method has been provided and the procedure contemplated therein is only to arrive at the annual value of production, which is contrary to the intention of Section 3A(1) of the Act and so it is ultra vires the said provision and also Articles 14, 19(1)(g) and 265 of the Constitution of India. According to him, the annual capacity of production of processed textile fabrics is sought to be determined on the basis of number of chambers fixed and the average value of production per chamber per month, without determining the capacity of production of factory, which cannot be sustained. He relied on number of decisions in support of his submission. 7.The learned Additional Solicitor General while defending the validity of the said rules has submitted that the method contemplated under the rules had bee....
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....ntemplated under Section 3A of the Act, and is beyond the scope of the said provision, and consequently it has to be struck down, as it is ultra vires the said provision. Under Section 3A of the Act, the levy can be done only after determining the annual capacity of production of the factory. As rightly submitted by learned Senior Counsel, there is no material before this Court as to how the average value or production per chamber per month was fixed at Rs. 11.72 lakhs in the case of fabrics of average value of up to and include Rs. 30/- per sq.m., and Rs. 15.63 lakhs in the case of fabrics of average value of exceeding Rs. 30/- per sq.m. without any basis the Central Government have fixed the said amount. At the same time, while contemplating the rate of excise duty under Notification No. 36/98 it is fixed as 1.5 lakhs per chamber per month in the case of a processing factory whose average value of fabrics is up to and including Rs. 30/- per sq.m. and Rs. 2 lakhs in the case of processing factory whose average value of fabrics is exceeding Rs. 30 per sq.m. 10.From the above, it is clear that the Central Government have not framed a workable formula to fix the annual capacity of....
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...., List II of the Seventh Schedule in respect of factory buildings in a municipal are based on floor area was illegal. New Manek Chowk Spinning & Weaving Mills Co. Ltd. v. Municipal Corporation of City of Ahmedabad, (1967) 2 SCR 679 = (AIR 1967 SC 1801). The Court held in that case that the method of adopting a flat rate for a floor area for determining the annual value adopted by the Corporation of Ahmedabad in exercise of the powers conferred upon it by the Bombay Provincial Municipal Corporation Act, 49, of 1949 was against the provisions of the Act and the rules made thereunder as well as all recognized principles of valuation for the purpose of taxation. If levy of tax in a municipal district based on floor area in respect of a factory building violates Article 14 of the Constitution when the tax is sought to be levied by the Municipal Corporation, we see no reasons to uphold the tax imposed under the impugned Act when the State in exercise of legislative authority conferred by Entry 49, List II Sch. : VII, imposes liability to the buildings solely on floor area. The vice of the Act in the present case is more pronounced than it was in New Manek Chowk Spinning and Weaving Mills....
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....hat has been done here and we must hold that the municipality did not observe the law and failed in its duty to determine the rateable value of each building and land comprised in each of the textile factories in terms of Rule 9(b) of the rules under the Bombay Provincial Municipal Corporations Act, 1949 so far as the assessment book for the year 1966-67 is concerned". 12.On the basis of the above-mentioned decisions, if we considered the scope of arguments of learned Senior Counsel with reference to the impugned notifications, the case of the petitioners has to be accepted under the impugned notifications, the Government have 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. Such a flat rate fixed by the Central Government cannot be sustained in view of the above-mentioned decisions of the Apex Court. Further, from a reading of Notification Nos. 36/1998 and 42/1998. I am not able to see any link between such notification though one is for fixing determination of production capacity and an....