TMI Blog2022 (6) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... s appended to provision in the beginning with a view to give the enacting part of the Section, in case of a conflict, an overriding effect over the provision or Act mentioned in the non-obstante clause. It is equivalent to saying that in spite of provision of Act mentioned in the non-obstante clause, the enactment, following it, shall have its full operation or that the provisions embraced in non-obstante clause will not be an impediment for operation of the enactment - Article 246 (1) and (2) as well as Article 246A (1) begins with non-obstante clause. In Article 246-A (1), the expression 'subject to' has also been used. The said expression means as one conveying a limitation/restriction on the exercise of power. The said expression neither circumscribes power nor enlarges the same. It is evident that the power under Article 246-A is an independent power and can be exercised not withstanding anything contained in Article 246 and Article 254. Article 246-A is unique as it contains the source of power as well as field of legislation and therefore, the the same is held to be simultaneous power of taxation - In the instant case, the levy of excise duty on tobacco and tobacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This intra court appeal arises out of an order dated 04.01.2022 passed in WP No.5237/2021 by which writ petition preferred by the Appellant questioning the levy of excise duty under the Central Excise Act, 1944 (hereinafter referred to as 'the 1944 Act') and levy and collection of National Calamity Contingency Duty (hereinafter referred to as 'NCCD' for short) on tobacco and tobacco products, has been dismissed. FACTS 2. Facts giving rise to filing of this appeal in a nutshell are that the appellant is a proprietary firm engaged in the manufacture of tobacco and tobacco products. The appellant had got itself registered under Rule 9 of Central Excise Registration Rules, 2002. After coming into force of Goods and Service Tax regime, the appellant got itself registered under Rule 10(1) of Central Rules Goods and Services Tax Rules, 2017. By a Notification bearing No.2/2019 issued in exercise of powers conferred by Section 5A(1) of the 1944 Act dated 06.07.2019, Central Excise Duty was levied on Tobacco and Tobacco products. 3. The appellant thereupon filed a writ petition in which challenge was made to the validity of the aforesaid Notification. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility to pay the tax. (vii) The only bar under Article 271 is that the surcharge contemplated therein excludes surcharge as regards the Goods and Services tax under Article 246A. In this case, the surcharge is by way of duty of excise and cannot be construed to be surcharge as regards Goods and Services tax as contemplated under Article 246A. (viii) Under Article 271, surcharge could be levied at any time to increase the duty and taxes and surcharge being imposed by way of Finance Act, has nothing to do with surcharge on Goods and Services tax that may still be levied. (ix) 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 vide Notification No.11/2017 dated 06.07.2019 cannot prohibit imposition of other additional duty or levy. (x) Levy of basic excise duty and NCCD on tobacco and tobacco products in not violative of Article 14 of the Constitution of India. The elements of caprice, irrationality, disproportionality or excessiveness coupled with lack of determining principle have not been made out in the pleading and therefore, the impugned levy does not suffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to legislate in relation to Goods and Services Tax is conferred by Article 246A of the Constitution without any corresponding entries in VIIth Schedule. It is argued that legislative powers under Article 246 and 246A are mutually exclusive and both the Articles cannot be invoked simultaneously by the Union Government in relation to tobacco and tobacco products. It is also urged that the non obstante clause in Article 246-A has an overriding effect on Article 246 of the Constitution. 8. It is contended that non obstante clause has to be construes as operating to set aside, as no longer valid anything contained in relevant existing laws which is inconsistent with the provisions contained therein. It is pointed out that after coming into force of 101st Constitutional Amendment, Article 248 of the Constitution which deals with residuary powers of legislation was amended and was made subject to Article 246-A. It is therefore contended that Article 246-A is exhaustive of taxes on all aspects qua tobacco and tobacco products and overrides the taxing powers referable to Article 246 or Article 248. It is submitted that legislative authority to levy excise duty cannot be sought from a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) TD. VS ARVINDBHAI RAMBHAI PATEL (2006) 8 SCC 726, CENTRAL BANK OF INDIA VS STATE OF KERALA (2009) 4 SCC 94, RS RAGHUNATH VS STATE OF KARNATAKA (1992) 1 SCC 335, UNION OF INDIA VS GM KOKIL (1984) SUPP SCC 196, 16 KESHVANANDA BHARATI VS STATE OF KERALA (1973) 4 SCC 225, MATERIAL RECYCLING ASSOCIATION OF INDIA VS UNION OF INDIA (2021) SCC ONLINE DEL 1988, RELIANCE INDUSTRIES AND OTHERS VS STATE OF GUJARAT AND OTHERS 2020 SCC ONLINE GUJ 694, VASU CLOTHING PRIVATE LIMITED VS UNION OF INDIA (2018) SCC ONLINE MP 1117, HERO MOTORCORP LTD. VS UNION OF INDIA (2020) 80 GST 111 (DELHI), SRI SRI SRI KC GAJAPATI NARAYAN DEO VS STATE OF ORISSA, 1954 SCR 1, FEDERATION OF HOTEL RESTAURANT ASSN. OF INDIA VS UNION OF INDIA (1989) 3 SCC 634, N VENUGOPALA RAVI VARMA RAJESH VS UNION OF INDIA (1969) 1 SCCC 681, 17 VENKATESHWARA THEATERS VS STATE OF AP (1993) 3 SCC 677, JOSEPH SINE VS UNION OF INDIA (2019) 3 SCC 39, DEPUTY COMMISSIONER OF INCOME TAX VS PEPSI FOODS 2021 SCC ONLINE SC 283 UNICORN INDUSTRIES VS UNION OF INDIA (2020) 3 SCC 492 SAI BHASKAR IRON LTD VS AP ELECTRICITY REGULATORY COMMISSI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provide for a common national market for Goods and Services. The amendment inter alia provided for subsuming of various central indirect taxes and levies such as Central Excise Duty, Additional Excise Duty, Central Surcharge and Cesses, so far as they relate to supply of goods and services. The relevant extract of statement of Objects and Reasons of the Amendment Act reads as under: 1. The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax. 2. The proposed Bill, which seeks further to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List) (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List) (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List 246A. Special provision with respect to goods and services tax: (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation .-The provisions of this article, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act came into force Article 271 of the Constitution of India reads as under: 271. Surcharge on certain duties and taxes for purposes of the Union: Notwithstanding anything in articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred to in those articles except the goods and services tax under Article 246A by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India. 19. Vide Section 12 of the Amendment Act, Article 279-A was inserted in the Constitution which provides for the Constitution of 'Goods and Services Tax Council' under Article 279-A(4)(a). The Council has to make recommendation to the Union and the States regarding the cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in Goods and Service Tax. Article 279-A(4)(f) provides for council to make recommendation to the Union and the States, regarding any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster for the facility of reference Article 279-A (4)(a) and (f) are extracted below for the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon with effect from such date as may be specified in the Notification. 22. The Parliament in respect of inter-state supply of goods or services or both has enacted Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the 'IGST Act'). Under Section 5(1) of the IGST Act, integrated Goods and Services Tax is levied on inter-state supply of Goods or Services or both on the recommendations of the Council. Section 6(1) of the Act empowers the Government to issue exemption Notifications on the recommendations of the Council. 23. Under Section 9 of the CGST Act and under Section 5 of IGST Act, the taxes are levied s per Schedule II and IV on the rates of GST and IGST on goods. In terms of the Notifications, tobacco products are subject to Goods and Services Tax at the rate of 24% under Schedule IV and tobacco leaves are subject to levy at the rate of 5% under Schedule II. Apart from the taxes, GST Compensation Cess at the rate of 160% is levied under Goods and Services Tax (Compensation to States) Act, 2017. 24. Section 3 of the 1944 Act was substituted by Taxation Laws (Amendment) Act 2017 which provides for levy and collection of Central Excise Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Act mentioned in the non-obstante clause, the enactment, following it, shall have its full operation or that the provisions embraced in non-obstante clause will not be an impediment for operation of the enactment. (SEE: M VENUGOPAL VS DIVISIONAL MANAGER, LIFE INSURANCE CORPORATION, AIR 1994 SC 1343, IRIDIUM INDIA TELECOM LTD. VS MOTOROLA (2005) 2 SCC 690). Article 246 (1) and (2) as well as Article 246A (1) begins with non-obstante clause. In Article 246-A (1), the expression 'subject to' has also been used. The said expression means as one conveying a limitation/restriction on the exercise of power. The said expression neither circumscribes power nor enlarges the same. The Supreme Court in UNION OF INDIA VS VKC FOOTSTEPS 2021 SCC Online SC 706 took note of 101st Constitutional Amendment to the Constitution of India and held as under: 32. The One Hundred and First Constitutional Amendment brought about a significant merger by contemplating a fiscal umbrella comprehending GST. Article 246A was adopted in terms of which, notwithstanding anything contained in Article 246 and Article 254, Parliament and (subject to Clause (2)), the State Legislature of every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower under Article 246- A does not result in denudation of power under Article 246. Article 246 and 246-A do not overlap each other and co-exist in the constitutional scheme. Article 246-A neither overrides nor restricts the operation of Article 246 read with Entry 84 of List I of Schedule VII. In the instant case, the levy of excise duty on tobacco and tobacco products under Entry 84 List I read with Article 246 is independent and co-exists without being impacted by the levy of GST on the same product under Article 246-A as both the Articles are mutually exclusive of each other and can coexist. The Central Excise duty and GST are levied under different sources of power and fields of legislation and do not overlap each other in any manner. For the aforementioned reasons, the issue whether after coming into force of Constitutional 101st Amendment Act, w.e.f 01.07.2017, the levy of Basic Excise Duty and NCCD which is a duty of excise on tobacco and tobacco products is constitutionally valid, is answered in the affirmative. 28. Article 245 and 246 of the Constitution describe the source of power and classify the same into three categories. In contrast Article 246A does not envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 FCR 179, 193] in the context of concepts of Duties of Excise and Tax on Sale of Goods said: ... The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of, his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separated and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale.... 32. Referring to the aspect doctrine Laskin's Canadian Constitutional Law states: The aspect doctrine bears some resemblance to those just noted but, unlike them, deals not with what the matter is but with what it comes within .... (p. 115) ... it applies where some of the constitutive elements about whose combination the statute is concerned (that is, they are its matter ), are a kind most often met with in connection with one class of subjects and others are of a kind mostly dealt with in connection with another. As in the case of a pocket gadget ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the States have chosen to tax only some types of luxuries and the Centre to tax, at least for the time being, only expenditure which results in such luxuries, should not be allowed to draw a curtain over the basic difference between the two categories of imposts. For instance, if the conflict alleged had been between the present State Acts and an Act of Parliament taxing expenditure incurred in the construction of theatres or the maintenance of race horse establishments or the like, there would have been no overlapping at all and the pith and substance of the central tax could well be described as expenditure and not luxuries . This distinction is not obliterated merely because of the circumstance that both legislatures have chosen to attack the same area of vulnerability, one with a view to keep a check on luxuries and the other with a view to curb undesirable expenditure . 30. Applying the aforesaid ratio, to the facts of the case, it is to be noted that excise duty under entry 84 List I has a source of power to tax under Article 246 of the Constitution of India and is levied on a distinct and separate aspect namely manufacture of tobacco products. It is dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the same taxable event and same subject. Thus, there is an overlapping on law which is not permissible. The petitioner contends that goods and services tax being already imposed by three enactments of 2017 as noticed above imposition of States Compensation Cess is levied on the same taxing event and has overlapping effect. 62. The principle is well settled that two taxes/imposts which are separate and distinct imposts and on two different aspects of a transaction are permissible as in law there is no overlapping . 64. Krishna Iyer, J. in Avinder Singh v. State of Punjab [Avinder Singh v. State of Punjab, (1979) 1 SCC 137], laid down that if on the same subject-matter the legislature chooses to levy tax twice over there is no inherent invalidity in the fiscal adventure unless there are some other prohibitions. In the above case the Government of Punjab had issued a notification under Section 90(4) of the Punjab Municipal Corporation Act, 1976 imposing tax at the rate of Rupee 1 per bottle on Indian made foreign liquor within the Municipal Corporation of Ludhiana. One of the contentions raised was that tax imposed is on sale, hence, beyond the Government power. In pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther duties of excise chargeable on such goods under the Central Excise Act, 1944 (1 of 1944) of any other law for the time being in force. Levy of NCCD is prescribed under Article 271 which unambiguously provides for increase in duty or taxes by surcharge. Therefore, there can be simultaneous levy of GST and levy of basic Excise duty and NCCD on tobacco or tobacco products. 33. The petitioners have placed reliance on decision of the Supreme Court in BAJAJ AUTO VS UNION OF INDIA, 2019 (19) SCC 801 and SRD NUTRIENTS PRIVATE LIMITED V. COMMISSIONER OF CENTRAL EXCISE, GUWAHATI, (2018) 1 SCC 105 to contend that levy of NCCD as a surcharge on tobacco and tobacco products is bad in law and for the period from 2017 to 2019, when excise duty was not levied on tobacco products, there cannot be any levy of NCCD. The Supreme Court in SRD NUTRIENTS (P) LTD SUPRA dealt with the issue as to when there is no excise duty, the education cess, the secondary and higher education cess could not have been demanded. The said issue was answered in the negative. In BAJAJ AUTO SUPRA, the Supreme Court dealt with the question of levy of NCCD, education cess and secondary and higher educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench of the Supreme Court in UNICORN INDUSTRIES SUPRA . In the instant case, an exemption to excise duty is expressly stated by way of a notification and to the contrary, there is no specific mention to the exemption to NCCD and an exemption of excise duty cannot be made applicable to NCCD unless the same is explicitly specified by way of Notification. Therefore, exemption from excise duty cannot automatically mean exemption from levy of NCCD. For the aforementioned reasons, it is axiomatic that levy of NCCD as surcharge on tobacco products is not bad in law. 36. A levy imposing tax is not immune from attack on the ground that it violates Article 14 of the Constitution of India. The Courts are not concerned with the policy underlying the taxing statute or whether a particular tax could not have been imposed in a different way or in a way the Court might think more just and reasonable. A Constitution Bench of the Supreme Court in RAMAKRISHNA DALMIA VS JUSTICE SR TENDOLKAR AIR 1958 SC 538 has dealt with the scope and ambit of Article 14 and has enumerated the circumstances in which a law may be held as violative of Article 14. In KHANDIGE SHYAM BHAT VS AGRICULTURAL ITO A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. (ii) The same principle has been reiterated in Federation of Hotel and restaurant Association of India versus Union of India, Justice MN Venkatachaliah (as the learned chief Justice then was), speaking for the Constitution bench held: It is now well settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the population of a fiscal policy legislature enjoys a wide latitude in the matter of selection of persons, subject matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this court on the matter had permitted the legislatures to exercise an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this court that a taxation statute, for the reasons of functional expediency and even otherwise, can pick and choose to tax some. About to classify being extremely broad and based on diverse considerations of executive pragmatism, the judicature cannot rush in where even the legislature of warily treads. All these operational restraints on judicial power must weigh more empathetically where the subject is taxation. Discrimination resulting from fortuitous circumstances arising out of particular situation, in which some of the tax payers find themselves, is not hit by Article 14 if the legislation, as such, is of general application and does not single them out for harsh treatment. Advantages or disadvantages to individual assessees are accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily fall on the other side of the line. 38. It is trite law that party invoking the protection of Article 14 has to make an averment with details to sustain such a plea and has to adduce material to establish its allegations and the burden is on the party to plead and prove that its right under Article 14 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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