1979 (3) TMI 202 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the levy of cess on jute twine and jute yarn used for captive consumption.
2. Scope of the Central Government's power under Section 9(1) of the Industries (Development and Regulation) Act, 1951.
3. Method of cess calculation (value vs. weight).
4. Discrimination in cess imposition based on weight.

Detailed Analysis:

1. Validity of the Levy of Cess on Jute Twine and Jute Yarn Used for Captive Consumption:

The appellants contested the levy of cess on jute twine and jute yarn used within their factories for producing finished jute products. They argued that these intermediate products should not be subjected to cess as per Section 9(1) of the Industries (Development and Regulation) Act, 1951, read with the Jute Manufactures Cess Rules, 1976. The learned Single Judge had previously upheld the validity of the cess, leading to the present appeals.

2. Scope of the Central Government's Power Under Section 9(1) of the Industries (Development and Regulation) Act, 1951:

The appellants argued that the Central Government could only levy cess on articles explicitly mentioned in the First Schedule of the Act. They contended that jute twine and jute yarn were not specified in Item 23(2) of the First Schedule, thus making the cess illegal. However, the court held that the First Schedule merely enumerates industries subject to control and does not limit the Central Government's power to levy cess on all goods manufactured or produced by a scheduled industry. The court emphasized that the term "all goods" in Section 9(1) includes both intermediate and final products.

3. Method of Cess Calculation (Value vs. Weight):

The appellants contended that cess should be calculated based on the value of the goods, as indicated by the proviso to Section 9(1), which limits the rate of cess to not exceed 12 n.p. percent of the value of the goods. They argued that the impugned levy based on weight was ultra vires. The court clarified that the proviso serves as a ceiling on the maximum cess and does not restrict the method of calculation to value alone. The court noted that the Central Government could levy cess based on weight, provided it did not exceed the maximum limit specified.

4. Discrimination in Cess Imposition Based on Weight:

The appellants argued that imposing cess based on weight was discriminatory, as coarser varieties of jute yarn and twine, which have greater weight but lesser value, would bear a disproportionate burden. The court rejected this argument, stating that the imposition of cess according to weight is a recognized principle of taxation and not per se arbitrary or discriminatory. The court also noted that the Central Government could adjust the rates to address any potential hardship.

Conclusion:

The court dismissed the appeals, upholding the validity of the cess on jute twine and jute yarn used for captive consumption. The court affirmed that the Central Government's power under Section 9(1) of the Industries (Development and Regulation) Act, 1951, is broad and includes the authority to levy cess on all goods manufactured or produced by a scheduled industry, whether intermediate or final products. The method of cess calculation based on weight was deemed valid, and the court found no discrimination in the imposition of cess based on weight. The appellants' request for a certificate under Article 133 of the Constitution for appealing to the Supreme Court was also rejected.