TMI Blog2017 (4) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... being manufactured and treating them to be food products. Held that: - Rule 6(5) of the Rules notified on 27th February, 2010 contemplates that the machines which the manufacturer does not intend to operate shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. Rule 10 contemplates that in case a factory did not produce the notified goods during any continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period provided the conditions specified in the said Rules are complied with. Rule 13 contemplates that in case a manufacturer does not intend to further operate a packing machine, he shall intimate to the authorities which shall then be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. The primary challenge is to the amendments in the 2010 Rules is to the clause, wherein speed of manufacturing packing machines has been made the relevant consideration for determining the production capacity of a factory. We do not find that such factor is unre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Case No. 6088 of 2015 - - - Dated:- 8-2-2017 - Hemant Gupta, ACJ and Dinesh Kumar Singh, J. Shri Prabhat Ranjan and Chandan Kumar, Advocates, for the Petitioner. Shri S.D. Sanjay, ASG and Anshay Bhadur Mathur, CGC, for the Respondent. JUDGMENT [Judgment per : Hemant Gupta, ACJ (CAV)]. - The petitioner has sought quashing of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 (for short, the Rules ) notified on 27th February, 2010 and also the amendment in the said Rules vide Notification dated 1st March, 2015 on the ground that it is violative of its fundamental rights under Article 19(1)(g) of the Constitution of India. 2. The petitioner is a manufacturer and exporter of Zarda and Chewing Tobacco (Schedule Tobacco Products) in the State of Bihar and has extensive market throughout India and foreign countries within the meaning of Section 3(p) of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (for short, the Act ). 3. The Central Government in exercise of the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many times on account of loss of market and simultaneously, the manufacturers are required to pay the excise duty as per the original deemed production. Therefore, it is alleged that the impugned Notification is violative of Article 19(1)(g) of the Constitution of India. 5. In the counter affidavit, it is contended that Section 3A of the Excise Act empowers the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. The Parliament has delegated the power to the Central Government to notify some goods for the purpose of levy and collection of duty of excise on such goods on basis of capacity of production. It is asserted that rationale of classification as also the legislative intent, policy and the guidelines have been laid down in the Act itself. The Excise Act itself provides for safeguards that where a factory producing notified goods did not produce for a continuous period of 15 days or more, then the duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfills such conditions as may be prescribed. It is also pointed out that vide Notification dated 27th Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the safeguard for checking leakage of excise revenue. 7. It is pointed out that the Directorate General of Central Excise Intelligence in the year 2006-07 alone detected cases involving evasion of excise duty to the tune of ₹ 192 crores in respect of Pan Masala and Gutka. As per studies made, the Pan Masala and Gutka industry is having a gross turnover of nearly ₹ 25,000 crores. Hence, the approximate revenue, which could have accrued to the exchequer of the State, should have been at a much higher side, which is indicative of the fact of substantial leakage in revenue due to evasion of duty by unscrupulous manufacturer in this sector. It is also stated that by rationalization and standardization of levy of excise duty, the unscrupulous manufacturers either will pay excise duty or will have to quit the market. The manufacturers, who are honest, are not likely to be affected by the object sought to be achieved as those honest tax payers will continue to pay the excise duty on the basis of the factors of production de hors the actual production. 8. It is further stated that the Government of India has considered all the relevant factors for the purpose of fixing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e levied and collected duty of excise on such goods in accordance with the provisions of this section. (2) Where a notification is issued under sub-section (1), the Central Government may, by rules, - (a) provide the manner for determination of the annual capacity of production of the factory, in which such goods are produced, by an officer not below the rank of Assistant Commissioner of Central Excise and such annual capacity shall be deemed to be the annual production of such goods by such factory; or (b) (i) specify the factor relevant to the production of such goods and the quantity that is deemed to be produced by use of a unit of such factor; and (ii) provide for the determination of the annual capacity of production of the factory in which such goods are produced on the basis of such factor by an officer not below the rank of Assistant Commissioner of Central Excise 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 during a part of the year only, the annual production thereof shall be calculated on proportionate basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operating packing machine per month Pouches not containing lime tube Pouches containing lime tube Xx xxx xxx xxx Explanation. - For the purposes of this rule, if there are multiple track or multiple line packing machines, one such track or line shall be deemed to be one individual packing machine for the purposes of calculation of the number of pouches per operating packing machine per month. 12. The Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 were amended on 1st March, 2015. The amendments read as under :- (i) for rule 4, the following rule shall be substituted, namely :- 4. Factors relevant to production. - The factors relevant to the production of notified goods shall be the number of packing machines in the factory of the manufacturer and the maximum packing speed at which such packing machines can be operated for packing of notified goods of various retail sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the factors to be considered for levy and collection of excise duty and such frequent changes of parameters brings uncertainty in the trade. It is further contended that levy has been increased many folds in the Notification dated 1st of March, 2015 which Notification will put the manufacturers of the Chewing Tobacco and Unmanufactured Tobacco out of the business which affects their rights under Article 19(1)(g) of the Constitution of India. The levy of excise duty on the basis of maximum speed of manufacturing is arbitrary and unreasonable as the manufacturer is not bound to achieve optimum utilization of the machine at any given point of time. Therefore, the factors to impose compound levy is arbitrary and unreasonable. 16. The learned counsel for the petitioner relied upon the judgment of the Hon ble Supreme Court reported as (1985) 1 SCC 641 = 1999 (110) E.L.T. 3 (S.C.) (Indian Express Newspapers v. Union of India). Learned counsel for the petitioner has also referred to another judgment of the Hon ble Supreme Court reported as (1995) 3 SCC 23 = 1995 (76) E.L.T. 241 (S.C.) (Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad) to contend that the goods are li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be enquired into and the investment by statute to exercise particular discretionary powers. In the latter case the question may be considered on all grounds on which administrative action may be questioned, such as, non-application of mind, taking irrelevant mattes into consideration, failure to take relevant mattes into consideration, etc., etc. On the facts and circumstances of a case, a subordinate legislation may be struck down a arbitrary or contrary to statute if it fails to take into account very vital facts which either expressly or by necessary implication are required to be taken into consideration by the statute or, say, the Constitution. This can only be done on the ground that it does not conform to the statutory or constitutional requirements or that it offends Article 14 or Article 19(1)(a) of the Constitution. It cannot, no doubt, be done merely on the ground that it is not reasonable or that it has not taken into account relevant circumstances which the Court considers relevant. (Emphasis supplied) 18. Thus, even the judgment referred to by the learned counsel for the petitioner does not support the argument raised as there is no challenge to the Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifteen days or when any packing machine is to be uninstalled, etc. In other words, if a packing machine is in working condition, then, its speed is a relevant consideration for imposition of excise duty. Such levy cannot be said to be arbitrary or unreasonable which may warrant intervention by this Court under power of judicial review. 21. The judgment in Moti Laminates Pvt. Ltd. s case (supra), is not applicable in the present case. The levy of excise duty is on manufacturing of Chewing Tobacco or Unmanufactured Tobacco. The product is a marketable goods. Merely because that some States prohibited the manufacturing of tobacco, it will not cease to be marketable commodity if the manufacturing process in a factory is continuing. The compound levy of excise duty is on the condition of a working packing machine having a manufacturing speed to produce pouches of chewable tobacco or unmanufactured tobacco. Therefore, the capacity of a packing machine is the base of marketing chewing tobacco and unmanufactured tobacco. The legislative intent in terms of the World Health Organization is to discourage the consumption of tobacco progressively. Therefore, the levy of excise duty with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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