TMI Blog2017 (3) TMI 1357X X X X Extracts X X X X X X X X Extracts X X X X ..... d 96ZP(3) is that both the Rules seek to eliminate the benefit of the procedure under Section 3A(4) of THE ACT in cases of those assessees who choose to opt for levy and collection of excise duty in accordance with the sub-rules (3) which are exceptions to the general Rules of levy and collection of duties provided under Rules 96ZO and 96ZP. Appeal allowed - decided in favor of petitioner. - Civil Appeal No. 7823 of 2014, Civil Appeal no.7825 of 2014 and Civil Appeal No.7824 of 2014 - - - Dated:- 24-3-2017 - Mr. J. Chelameswar And Mr. Abhay Manohar Sapre JJ. For the Appellant : Mr. Aditya Bhattacharya, Adv., Mr. Abhishek Anand, Adv., Mr. Victor Das, Adv., Mr. Anandh K., Adv., Mr. M. P. Devanath,Adv. Ms. Anushree Menon, Adv. Mr. Vikas Mehta,Adv. For the Respondent : Mr. B. Krishna Prasad,Adv. JUDGMENT Chelameswar, J . 1. These three appeals are factually interconnected and also raise a common question of law. 2. The appellants in Civil Appeal No.7823/2014 M/s. Bhuwalka Steel Industries Ltd. originally owned three (3) industrial units (Hot Re-rolling Steel Mills) located in the State of Karnataka. Subsequently, two of those units came to be acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and such annual capacity of production shall be deemed to be the annual production of such goods by such factory: Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production. (3) The duty of excise on notified goods shall be levied, at such rate as the Central Government may by notification in the Official Gazette specify, and collected in such manner as may be prescribed: Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed. (4) Where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and redetermine the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mode of collection of such assessed duty, Government of India is authorised under Section 3A to prescribe different rates of duty and different modes of assessment and collection of duty on the NOTIFIED GOODS. Under sub-section (2), the Government of India was authorised to make rules providing for either the determination of the annual capacity of production (hereafter ACP) or the factors relevant to the ACP of the factory in which NOTIFIED GOODS are produced. The determination of the ACP is required to be made by the Commissioner of Central Excise . It further declared that a factory where ACP is determined shall be presumed to annually produce the NOTIFIED GOODS equivalent in quantum to its ACP. Sub-section (4) stipulates that in a case where an assesse claims that the actual production of his factory is lower than the ACP, the assessee is entitled to seek the determination of the actual production of the NOTIFIED GOODS in his factory by adducing appropriate evidence. Upon such claim being made, the Commissioner of Central Excise is required to determine the actual production of the assessee s factory and also redetermine the amount of duty payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r metric tonne respectively under Rule 96ZP(1) and (3) depending upon the assessee s choice regarding the time of the payment of duty. Rule 96ZP seeks to levy the excise duty at a concessional rate of ₹ 300/- per metric tonne. 10. Rule 96ZP prescribes a levy not on the basis of the value of the specified goods but on the quantum of production. It further authorises the levy and collection of duty at different rates depending upon the mode of payment of the duty chosen by the manufacturer. In other words, Rule 96ZP creates two classes of manufacturers of the goods falling within the sweep of the Rule, though both the classes of manufacturers produce goods of the same description. One class who choose to pay the duty on monthly basis (falling under sub-rule (3)) and the other class paying duty in a manner otherwise specified under the various other sub-rules of Rule 96ZP. 11. Undisputedly, Rule 96ZP is applicable to the products of the appellants herein. It is sufficient for our purpose to note that under Rule 96ZP(1) (Rule 96ZP(1) A manufacturer of non-alloy steel hot re-rolled products falling under sub-heading Nos. of the Schedule to the Central Excise Tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the levy of a concessional rate of excise duty on manufacturers who are willing to opt for a scheme of making the payment of tax on a monthly basis instead of postponing the payment till the end of the year as prescribed under sub-rule (1). However, sub-rule (3) also imposes a limitation on those manufacturers who opt for the benefit of a reduced rate of duty by disabling them from availing the benefit of the procedure contemplated in sub-section (4) of Section 3A of THE ACT that is disputing the correctness of the determination of the ACP of the factory made under the RULES of 1997. 13. It is in this background of the provisions of law, these appeals are required to be decided. 14. In all these appeals, the ACP of the concerned factories was determined by different orders. Obviously the ACP so determined was less than the actual production of each one of the factories for the financial year 1996-97. Therefore, the ACP was deemed to be the same as the actual production for the financial year 1996-1997 in view of the mandate contained under Rule 5 of the RULES of 1997. 15. Aggrieved by the determination of the ACP each of the appellants pursued multiple leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ACP and, therefore, is clearly intra vires. 21. To determine the issue, it is required to examine the scheme of Section 3A of THE ACT, the relevant Rules framed thereunder and the mischief which Parliament sought to control while enacting Section 3A. In the context, we must keep in mind the general scheme of THE ACT. 22. Section 3 of THE ACT, as it existed at the relevant point of time authorised the levy and collection of a duty of excise on all excisable goods which are produced or manufactured in India. The expression excisable goods is defined under Section 2(d) of THE ACT. At the relevant point of time, it read as follows: Section 2(d). excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt; The rates of duty for the various classes of goods are stipulated from time to time under the Central Excise Tariff Act, 1985. Section 4 of THE ACT stipulated the method and manner of determination of the value of the goods for the purpose of the determination of the duty liability of the manufacturers who manufacture or produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Government to whom the power to make rules was given under Section 33 and the committee to whom power to make bye-laws was given under Section 34 widened the scope of presumption by providing further that if a notified agricultural produce is weighed, measured or counted within the notified area, it shall be deemed to have been sold or purchased in that area. The creation of legal fiction is thus beyond the legislative policy. Such legal fiction could be created only by the legislature and not by a delegate in exercise of the rule-making power. We are, therefore, in full agreement with the High Court that Rule 74(2) and Bye-law 24(5) are beyond the scope of the Act and, therefore, ultra vires. The reliance placed by the assessing authority as also by the appellate and revisional authority on these provisions was wholly misplaced and they are not justified in holding, merely on the basis of weighment of copra within the notified area committee that the transaction of sale took place in that market area. 28. The argument of the appellants with respect to Rule 5 appears tobe two-fold: (i) a legal fiction (deeming provision) can only be created by legislation but not by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be equal to the actual production of the mill during the financial year 1996-97 is beyond the scope of the delegate and is therefore liable to be declared ultra vires, arbitrary violative of article 14, unconstitutional and bad in law. Reference may be made to (1997) 5 SCC 516). 29. We are in total agreement with the principle laid down by this Court in paragraph 28 of Agricultural Market Committee . 30. However, the question in this case is whether Section 3A(2) and/or Rule 5 really create fictions. To understand the same, the context and purpose of Section 3A and Rule 5 is required to be examined. The Scheme and purpose of Section 3A is already examined at para 20. Rule 5 stipulated that if the ACP determined in accordance with the preceding four Rules is less than the actual production of a particular assessee for the financial year 1996-1997, the authority determining the ACP is required to abandon the figure of ACP arrived at by employing the procedure contained in Rules 1 to 4 and adopt the actual production achieved by the assessee for the financial year 1996-97 (The relevance of the financial year 1996-97 in the context of the RULES i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption created under Rule 5 is similar to the one contained in illustration (d) (Illustration (d) That a thing or state of things which has been shown to be in existence within a period shorter than that within which such things or state of things usually cease to exist, is still in existence) to Section 114 of the Evidence Act. 32. There is a clear distinction in law between a legal fiction and presumption . (Nandlal Wasudeo Badwaik v. Lata Nandlal Badwaik Another, (2014) 2 SCC 576. We must understand the distinction between a legal fiction and the presumption of a fact. Legal fiction assumes existence of a fact which may not really exist. However, a presumption of a fact depends on satisfaction of certain circumstances. Those circumstances logically would lead to the fact sought to be presumed. Section 112 of the Evidence Act does not create a legal fiction but provides for presumption. (Para 18) A distinction commonly taken between the fiction and the legal presumption runs something as follows: A fiction assumes something which is known to be false; a presumption (whether conclusive or rebuttable) assumes something which may possibly be true. This distinction is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained raises a presumption that the possessor is either the thief or a receiver. 4. Bare presumptions of fact, which are nothing but arguments to which the Court attaches whatever value it pleases.) were inferences which the judges were directed to draw from certain states of facts in certain cases, and these presumptions were allowed a certain amount of weight in the scale of proof; such a presumption and such evidence amounted to full proof, such another to half full, and so on. (Stephen, James Fitzjames, The Indian Evidence Act With An Introduction on the Principles of Judicial Evidence, (Calcutta, Thacker, Spink Co.) Chapter IV p. 132) Nothing is brought to our notice to say that a non-sovereign law making body can not make a rule of evidence containing a presumption. In our opinion, Agricultural Market Committee is not an authority for the proposition that a presumption cannot be created by subordinate legislation. 34. Rules of evidence are the principles of law which command the courts or other bodies whose duty is to determine the existence or otherwise of certain facts. The Anglo saxon legal system recognises that facts could be established either by di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the ACP of the manufacturers. It further declares that the ACP so determined shall be deemed to be the annual production of such goods by such factory . In other words, sub-section (2) commands that a factory whose ACP is determined in accordance with the rules made thereunder must be believed to produce the same quantum of goods equal to the ACP for every succeeding year. The question is whether such a declaration creates a legal fiction or only a presumption (rule of evidence)? 38. We have already noticed that by definition a fiction always conflicts with the reality whereas presumption may be proved to be true . It therefore follows that there is no possibility of a fiction being rebutted by evidence. The belief flowing from Section 3A(2) regarding the annual production of a manufacturer could be rebutted by adducing evidence. Section 3A(4) provides for such rebuttal. Therefore, in our opinion, Section 3A(2) embodies only a rule of evidence (presumption) but does not create a legal fiction. The language employed by the draftsman is likely to mislead to a conclusion that a fiction is created. But on a true and proper construction of the entire Section 3A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41. But for the declaration of sub-rule (3) of Rule 96ZP, an assessee whose ACP is determined in accordance with the Rule 3 of the RULES of 1997 would be entitled under sub-section (4) of Section 3A of THE ACT, to seek the determination of his actual production and the tax liability thereon. 42. The determination of the ACP is a one time affair. It appears from the factors indicated in the Rule 3 that the ACP would remain unaltered so long as there is no change in the machinery employed and the number of utilized hours of the machinery remains constant. But the number of utilized hours could vary from time to time depending upon various factors, such as, the availability of electric power, capital or labour etc. Such variations could result in a situation that the actual production of the factory for any given interval of time is less than the ACP. Therefore, it is declared under Section 3A(4) that an assessee is entitled to seek determination of the actual production of his factory if it is less than the ACP. 43. In our opinion, such an opportunity provided under Section 3A(4) is a recurring opportunity available to the assessee from time to time. We rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule which prevents the assessee from opting out of the Scheme of Rule 96ZP(3). 47. After availing the scheme for a month by paying the duty in advance, if the assessee ends up in a situation of not being able to produce the quantum of goods equivalent to 1/12 of his ACP, we see no reason which compels the assessee to continue the availment of concessional rate of duty (for the next month) on a quantum of production which he is unable to achieve. In our opinion the assessee must have an option to make the payment of duty in accordance with Rule 96ZP(1) at a higher rate but on the actual production . For those assessees who chose to pay the duty at higher rate in accordance with sub-rule (1) the benefit of section 3A(4) is available. The rule does not bar it. However the question remains how frequently the assessee is entitled to exercise such an option; whether it is annual or monthly is a matter which requires a further examination. 48. It is argued by the learned counsel for the respondent in view of the two judgments of this Court reported in Commissioner of Central Excise Customs v . Venus Castings ( P ) Ltd . , (2000) 4 SCC 206, Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of tax is dependent on either actual production of goods or on some other basis. The incidence of tax is, therefore, on the production of goods. It cannot be said that collection of tax based on the annual furnace capacity is not relatable to the production of goods and does not carry the purpose of the Act. In holding whether a relevant rule to be ultra vires it becomes necessary to take into consideration the purpose of the enactment as a whole, starting from the preamble to the last provision thereto. If the entire enactment is read as a whole indicates the purpose and that purpose is carried out by the rules, the same cannot be stated to be ultra vires of the provisions of the enactment. Therefore, it is made clear that the manufacturers, if they have availed of the procedure under Rule 96ZO ( 3 ) at their option, cannot claim the benefit of determination of production capacity under Section 3A ( 4 ) of the Act which is specifically excluded . Two things are required to be noticed from the above. This Court made references to Rule 96ZP in the earlier paragraphs of the judgment but when it came to the conclusion, it only dealt with Rule 96ZO(3) but not Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Venus Castings. 54. Apart from the various problems noticed by us in the abovementioned two judgments, there are marked differences in the language employed under Rule 96ZP(3) and the scheme appears to be different from the one adopted under the scheme of Rule 96ZO(3). 55. Rule 96ZO deals with levy, assessment and collection of excise duty on the manufacture of non-alloy steel ingots and billets. Duty on such goods is payable at the rate of ₹ 750/- per metric tonne. Sub-rule (3) prescribes levy and collection of a lump sum of ₹ 5 lakhs per month in cases of those manufacturers who have a total furnace capacity of three metric tonnes installed in their factories. However, such a scheme is available at the option of the assessee. In other words, a manufacturer has a choice to make a lump sum payment of ₹ 5 lakhs, irrespective of his actual production for that month, in two instalments instead of paying the duty at the rate of ₹ 750/- per metric tonne of the actual production of the manufacturer. Whether the capacity of three metric tonnes in the said sub-rule is the capacity of the factory per day or per month or per annum is not very clear f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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