TMI Blog2016 (2) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... its. Both export their goods to various countries. There cannot be further sub-classification of SSI units exporting to Nepal and those SSI units exporting to the countries other than Nepal since after 01.03.2012 the distinction has been obliterated. This distinction which was prevalent till 01.03.2012 lost its relevance on account of change of the Government of India policy. Continued reference of exports to Nepal in SSI exemption notification No.7/2003 would render, to that extent, such notification discriminatory and, therefore, violative of Article 14 of the Constitution. Under the circumstances, the portion “and Nepal” appearing in Explanation Clause (G) to SSI Notification No.8 of 2003 is declared unconstitutional with effect from 01.03.2012. - SPECIAL CIVIL APPLICATION NO. 13882 of 2015, SPECIAL CIVIL APPLICATION NO. 13884 of 2015 - - - Dated:- 4-2-2016 - MR. AKIL KURESHI AND MR. MOHINDER PAL, JJ. FOR THE PETITIONER : MR PARESH M DAVE, ADVOCATE with MR PARITOSH GUPTA, ADVOCATE FOR THE RESPONDENT : MR RJ OZA, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioners have challenged a portion of Notification No.8 of 2003 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Annexure appended to this notification (hereinafter referred to as the specified goods), from so much of the aggregate of, - (i) the duty of excise specified thereon in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the First Schedule); and (ii) the special duty of excise specified thereon in the Second Schedule to the said Central Excise Tariff Act, 1985 (hereinafter referred to as the Second Schedule), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (3) of the said Table: Provided that nothing contained in this notification shall apply to a manufacturer who has availed the exemption under notification No.39/2001-Central Excise, dated the 31st July, 2001, published in the Gazette of India vide number G.S.R.565(E), dated the 31st July, 2001, in the same financial year: Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or are exempt from the whole of the duty of excise leviable thereon. TABLE S.No . Value of clearances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (G) provided that clearances for home consumption wherever referred to in this notification shall include clearances for export to Bhutan and Nepal. By implication, thus, the exclusion of clearances for export provided in para 3 of the said notification would not apply in case of the clearances for export to either Bhutan or Nepal. 3. This exclusion had a history, namely, special bilateral trade relations between India and Nepal flowing from various treaties. In particular, our attention was drawn to the Indo-Nepal Treaty of October 2009 in which it was agreed by the two countries that the Government of India would allow the Government of Nepal payment of the excise and other duties collected by the Government of India on goods produced in India and exported to Nepal, subject to certain conditions. Relevant portion of the Treaty reads as under: III. With Reference to Article III 1. The Government of India will allow the Government of Nepal payment of the excise and other duties collected by the Government of India on goods produced in India and exported to Nepal provided that: (I) Such payment shall not exceed the import duties and like charges levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter is that corresponding to the Government's policy flowing from the Indo-Nepal Treaty noted above, passing on excise duty payable on goods manufactured for export to the Government of Nepal on such exports, no duty rebate or exemption from payment of excise duty was granted. 7. This situation, however, underwent a major change when such bilateral treaty no longer prevailed. This can be seen from the clarification issued by the Government of India under Circular dated 13.01.2012 in which it is stated as under: ...Pursuant to Revised Treaty of Trade between Government of India and Government of Nepal, exports to Nepal have been put at par with exports to other countries (except Bhutan). In this regard, six Notification Nos.24/2011-Central Excise (N.T.), 27/2011-Central Excise N.T.), 27/2011-Central Excise (N.T.), 28/2011-Central Excise (N.T.) and 29/2011-Central Excise (N.T.) all dated 6.12.2011 have been issued to amend earlier Notification Nos.19/2004-Central Excise (N.T.) dated 6.9/2004, 42/2001-Central Excise (N.T.) dated 26.6.2001, 43/2001-C.E.(N.T.) dated 26.6.2001, 44/2001-Central Excise (N.T.) dated 26.6.2001 and 45/2001-Central Excise (N.T.) dated 26.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the exports made on furnishing bond. 10. Case of the petitioners is that, by virtue of revised treaty between the Government of India and the Government of Nepal, exports to Nepal would now no longer be treated different from exports to any other country. It was for this reason that earlier notifications issued under Rule 18 or 19 of the said Rules came to be suitably amended and any export to Nepal would now qualify for rebate or would be permissible on furnishing bond. In view of such circumstances, according to the petitioners, even the SSI exemption notification No.8 of 2003 should have been amended. The term clearances for home consumption which will include clearances for export to Nepal and Bhutan ought to have been changed deleting reference to exports to Nepal. Purely due to oversight, the Government of India did not amend such notification. In this context, the petitioners drew our attention to the minutes of the Tariff Conference held on 28/29.9.2015 which was attended by Commissioners of Central Excise and Customs across the country in which, in the context of the requirement of amending said SSI notification No.8 of 2003, it was discussed and resolved as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest and penalty. Assistant Commissioner of Central Excise passed Order-in- Original dated 30.6.2014 and confirmed the central excise duty liability of ₹ 4.81 lakhs and imposed matching penalty under section 11-AC of the Central Excise Act. The petitioners' appeal failed before the Commissioner. In this background, the petitioners have prayed for striking down the words and Nepal in para 5 (G) of SSI notification No.8/2003 and also prayed for setting aside the Order-in- Original as well as the Appellate Order, 12. Learned counsel for the petitioners submitted that the entire policy of including exports made to Nepal within the limit of home consumption provided in SSI exemption notification No.8/2003 underwent a major change when, due to change in the bilateral treaty, exports to Nepal, which were till now considered local clearances, would now be treated on par with exports to any other country. It was because of this change, that the Government of India had amended notifications issued under Rules 18 and 19 of the said Rules and included exports to Nepal for rebate under Rule 18 and for exports on furnishing bond as per Rule 19. Even the conference of Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Nepal would have to include value of such exports within the exemption limit, though exports to Nepal now stand on the same footing as export to any other country. Continued reference of export to Nepal on the said notification is thus wholly arbitrary. The SSI Notification 8/2003 provides exemption to SSI units from payment of excise duty subject to the mandatory ceiling. Value of exports to Nepal, would be includable for computing such limit though no excise duty is payable on such clearances. 17. Quite apart from total oversight or inaction on the part of the Government of India in not making such corresponding changes, we find that the same is also discriminatory. In this context, we recognize that the exemption in question is issued by the Government of India in exercise of the powers of delegated legislation. Being in the nature of legislative functions, there are limited grounds on which validity thereof can be questioned in a Court of law. However, it is well-settled that such legislation is not immune from challenge to its constitutionality. In Vasu Dev Singh v. Union of India reported in (2006) 12 SCC 753, the Supreme Court observed that, while considering the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o apply to the entire class and the Government cannot create sub-classification thereby excluding one sub-category, even when both the sub-categories are of same genus. If that is done, it would be considered as violating the equality clause enshrined in Article 14 of the Constitution. Therefore, judicial review of such Notifications is permissible in order to undertake the scrutiny as to whether the Notification results in invidious discrimination between two persons though they belong to the same class. In Aashirwad Films v. Union of India and Others4, this aspect has been articulated in the following manner: 9. The State undoubtedly enjoys greater latitude in the matter of a taxing statute. It may impose a tax on a class of people, whereas it may not do so in respect of the other class. 10. A taxing statute, however, as is well known, is not beyond the pale of challenge under Article 14 of the Constitution of India. 11. In Chhotabhai Jethabhai Patel Co. v. Union of India, AIR 1962 SC 1006 it was stated: (AIR p. 1021, para 37) 37. But it does not follow that every other article of Part III is inapplicable to tax laws. Leaving aside Article 31(2) that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person challenging the act of the State as violative of Article 14 has to show that there is no reasonable basis for the differentiation between the two classes created by the State. Article 14 prohibits class legislation and not reasonable classification. 19. Reverting back to the facts of the case, we may recall, in view of change in the bilateral trade relations between the Government of India and the Government of Nepal, exports to Nepal are now placed at par with exports to other countries. If that be so, reference to clearances for export to Nepal in Explanation clause (G) to SSI notification No.8/2003 has been rendered wholly redundant. If such reference continues even after 01.03.2012, the situation that would arise is that, for all purposes, export to Nepal would be treated on par with export to any other country. For the purpose of SSI exemption under said notification No.8/2003, however, it would continue to be treated as clearances for home consumption. This will be plainly discriminatory vis-a-vis other SSI units who might be having exports to countries other than Nepal as compared to the SSI units like the petitioners whose substantial exports may be to Nep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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