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2022 (1) TMI 380 - HC - GSTConstitutional validity of levy of basic excise duty and NCCD, after coming into force of the Constitution (101st Amendment) Act, with effect from 01.07.2017 - permissibility of simultaneous levy of GST under Article 246A of the Constitution of India and levy of basic Excise duty and NCCD under Article 246 qua tobacco and tobacco products - simultaneous levies would be consistent with purposive and harmonious construction of the Constitution or not? Power under Article 246 read with entry 84 List I post the GST regime and introduction of Article 246A of the Constitution of India - HELD THAT:- The effect of introduction of Article 246A is conferment of the power of simultaneous levy on goods and services in the nature of Goods and Services Tax and the use of the word “notwithstanding” which is a non-obstante clause does not have the effect of abrogation of power available under Article 246. The words “notwithstanding anything contained in Article 246” ought to be construed as having the effect of merely clarifying that inspite of the power under Article 246, power under Article 246A could be exercised and that Article 246 would not be an impediment to the operation of 246A - irrespective of the restructuring of Entry 84 of List I the power under Article 246 remains unaltered. The intention of preserving such power under Article 246 is further reflected in the repealing and saving provision of Section 174 of the Central Goods and Services Tax Act, 2017 which saves provisions of the Central Excise Act, 1974 in respect of goods included in Entry 84 of the Union List of the Seventh Schedule to the Constitution. Taxing on taxable event, Aspect Theory and Subsumation of manufacture in Supply - Subsumation of manufacture in the Concept of Supply - HELD THAT:- The legal argument based on intendment of avoiding of cascading taxes will not have the effect of prohibiting levy of tax which otherwise is permissible as the power under Article 246 remains protected and preserved - It must also be noted that the Legislature enjoys a wide latitude to decide on the methodology of revenue generation and the courts should not rush and must tread carefully while dealing with legislation based on Fiscal Policy. In the process of achieving ultimate goal as envisaged while introducing the GST the continuance of levies under the previous legislations unless barred ought to be permitted as being competent visà-vis available source of power which cannot be defeated by resort to argument based on objects of GST as contained in the Objects Clause. Taxing on taxable event, Aspect Theory and Subsumation of manufacture in Supply - Taxing of Taxable event - HELD THAT:- Even though the petitioner would contend that what is being taxed is the aspect of manufacture under the Central Excise Act and the same taxable event of manufacture as subsumed in GST, even if such contention were to be accepted it would amount to taxing of the taxable event of manufacture on two occasions and unless there is any prohibition in law such a levy would still be permissible - It must be noted that taxing statutes are revenue generation statutes and in that context, levy even if on the same taxable event which may also amount to double taxation is per se not prohibited unless prohibition can be read into on the basis of any other constitutionally available principle. The aspect as to whether the levy of excise duty when considered along with other existing duties including NCCD has the effect of falling foul of constitutional guarantee may be a different ground of attack. Taxing on taxable event, Aspect Theory and Subsumation of manufacture in Supply - Aspect Theory - HELD THAT:- In the case of Federation of Hotel and Restaurant v. Union of India [1989 (5) TMI 50 - SUPREME COURT] the question that was considered was whether expenditure tax was in “pith and substance” actually a tax on luxuries which was squarely covered by Entry 62 List II or it could be construed as a tax on consideration paid on purchase of goods which would fall under Entry 54 of List II and accordingly, the question of legislative competence of the Parliament was in question. The then Attorney General Parasaran had invoked the Aspect Theory by contending that there could be different aspects of the same matter constituting distinct fields of legislation. In effect it was submitted that Hotels may be taxed in their “expenditure aspect” by the Union and in their “luxury aspect” by the States. The Apex Court was essentially considering legislative competence of the Union Parliament and it is in that context that the principle of the Aspect Doctrine appears to have been considered and eventually held that the question as to whether power under Article 246A which is tax on goods and services if levied on a product could also be a subject of levy of an indirect tax on the same product in exercise of power under Article 246. While the power under Article 246A provides for a simultaneous levy by the Parliament and subject to 246A (2) the legislature of every State; on the other hand, power under Article 246 is with the Union. The question of legislative competence under 246A vis-à-vis Article 246 would not strictly fall within the ambit of applicability of the Aspects Theory. Legality of levy of NCCD as per Section 136 of the Finance Act, 2001 - HELD THAT:- As per Section 136 of the Finance Act, a surcharge by way of duty of excise at the rates specified in the schedule is levied - it becomes clear that surcharge is a methodology for raising additional revenue and has nothing to do with the leviability of the tax or the assesses liability to pay the tax. NCCD as a surcharge and Article 271 - HELD THAT:- The levy of the surcharge i.e., NCCD by way of provision of the Finance Act, though is described as a duty of excise, is legally speaking a self-contained levy which stands independent of the duty - the interpretation of the petitioners that surcharge cannot be levied under Article 271 as regards those goods and services which are included under Article 246A is liable to be rejected as no such restriction could be placed on a plain reading of Article 271 which provides that surcharge could be levied at any time to increase duties or taxes. In fact, surcharge being imposed by way of the Finance Act has nothing to do with surcharge on GST that may still be levied. As levy under Article 246 is permissible even after introduction of Article 246A, the levy of surcharge tracing power under Article 271 would still subsist even if the goods are subjected to levy of goods and services tax under Article 246A. Levy of NCCD during the period of Exemption of Excise Duty - HELD THAT:- Though the Notification No.2/2019 dated 06.07.2019 reintroduced a nominal basic Excise Duty, the levy during the period of 30.06.2017 and 06.07.2019, is not disturbed and accordingly the relief sought for in by the petitioners for refund of NCCD during such period is liable to be rejected. It must further be noted that even though NCCD is in the nature of duty of Excise and may be construed to be an additional duty, yet it is an independent levy and exemption granted on Excise Duty cannot prohibit imposition of other additional duties or levy and accordingly there is no bar for operation of NCCD. Levy of basic excise duty and NCCD is violative of Article 14 of the Constitution of India - HELD THAT:- It is a settled principle that the Legislature has a larger discretion in the matter of classification for the purpose of tax. The requirement however is that there is a classification and a rational nexus between such classification and the object sought to be achieved - No case is made out for interference on the ground of the levy being hit by the law contained in Article 14. Petition dismissed.
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