TMI Blog2003 (3) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... he writ petitioners are rerollers and they manufacture M.S. Rods, Tor Steel, Angles, Channels, Flats, Squares etc., from ingots and billets. The product manufactured by the petitioners is an excisable commodity. Excise is a duty on excisable goods manufactured or produced in India and the Central Excise Act provides for charging of duty, valuation and other procedure for recovery. The rate of duty for excisable goods is notified under the Central Excise Tariff Act and Notification issued from time to time. The levy of excise duty is based on the manufacture and productions in actual and on the goods as per Section 3A of the Act. Section 3A confers the power for framing Rules for determining the annual capacity of production of the factory. The Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 was framed by the Government of India in exercise of powers conferred by sub-section (2) of Section 3A. Rule 3 of the said Rules prescribes the method to determine the annual capacity of production by a formula, which annual capacity production has to be determined by the Commissioner of Central Excise. By a Notification No. 25/97, dated 25-7-1997, Hot Re-rolling Steel Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 3A and the consequential introduction of new rules which is warranted by the facts of the case. It is contended that the rule is neither ultra vires, nor it is liable to be declared as unconstitutional. 8.The learned Central Government Standing Counsel also contended that identical contention stands rejected by the Delhi High Court as well as Supreme Court of India and therefore no interference is called for. That apart, the Rule 5 which is being impugned is constitutionally valid and being a taxing statute and covering certain varieties of the items, it is not open to the petitioner to challenge the same. 9.The only point that arise for consideration is : Whether Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is liable to be declared as unconstitutional, violative of Article 14 or runs counter to Section 3A of the Central Excise Act and the Rules framed thereunder? 10.The learned counsel for the petitioners took the court through Section 3A as was introduced on 25-7-1997 with effect from 1-8-1997, the Notification Nos. 31/97, 32/97, 33/97 dated 1-8-1997 and 44/97, 45/97 dated 30th August 1997 and the notification which was being in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Apex Court had occasion to consider the scope of Section 3A(4) of the Central Excise Act, determination of Actual Production and which determination of the duty liability according to the Central Excise Rules, 1944 and also examined the question whether the rule is ultra vires to the parent Act. In respect of Section 3A(4) of the Central Excise Act and Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules, the Apex Court in the said pronouncement held thus :- "11. The learned counsel for the respondent contended that Rule 96-ZO(3) is contrary to Section 3A(4) of the Act and, therefore, should be held to be ultra vires or the relevant rules should be read in such a manner so as to allow the procedure prescribed under the provisions of Section 3A(4) to be followed. Section 3A of the Act provides for levy and collection of the tax arising under the Act in such manner and at such rate as may be prescribed by the Rules. Section 3A provides a special procedure in respect of the power of the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. If such interpretation is not accepted, it is contended, that the levy of tax is in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Central Excise and Customs v. Venus Castings (P) Ltd., the contention advanced with respect to the validity of Rule 5, cannot be countenanced. Section 3A of the Act enables the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. The intention or the reason for introduction of such a statutory provision in certain sectors like the Induction Furnaces, Steel Re-rolling Mills where there were large scale evasion of excise duty on such goods is substantial and the production is not disclosed accurately and as a result of which collection of duty on the basis of their production capacity was considered to be appropriate. 16.Under the scheme evolved in Section 3A the actual production capacity of mills and furnaces is determined by the Commissioner of Central Excise in terms of the Rules to be framed and thereafter the assessee would be liable to pay duty on such determination and thereafter the assessee would be liable to pay duty based on such determination. If the determination is disputed by the assessee, the Commissioner may be required to re-determine the same as provided in Section 3A(4). In the said case before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for rendering the services. According to the State, the evidence on record shows that the cost of services is twice the total amount recovered from all types of vehicles. The balance of expenditure is met by the State from the general revenues. Even from this half collection, the motor cycles and tricycles contribute only 6.4 per cent. The percentage of motor cycles and tricycles is 56 to 58 per cent of all vehicles. Thus, even insubstantial increase in their rates cannot be said to be not a "regulatory or compensatory" tax measure. The Act, as at present, is not violative15. of Article 14 of the Constitution. The fact that company-owned vehicles are taxed at three times the rate payable by individuals, does not make the legislation violative of Article 14. Historically, the company-owned vehicles have always been taxed at a rate higher than the individually-owned vehicles. As appears from the records produced, the motor cycles and tricycles constituting 56 to 58 per cent of all types of vehicles contribute only 6.4 per cent of the total revenue earned through the tax imposed by the Act. It is well settled that the legislature has the power to distribute tax burden in a flexibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the annual capacity determined by the formula in sub-rule (3) of Rule 3 in respect of a Mill, is less than the production of the mill during the financial year 1996-97, for the next financial year, annual capacity so determined shall be deemed to be equal to the actual production of the mill during the financial year 1996-97. This is a statutory fiction which the Parliament is competent to enact has introduced such a fiction and there is no discrimination in it. The Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 not only provides a specific rule or special procedure for the particular type of industry, but also enable either to adopt the formula or to go by the guidelines which is in no way violative of Article 14 or any other constitutional provisions. Rule 5 in no way runs counter to Section 3A and such a contention cannot be sustained. 19.In Kamkhya Steels (P) Ltd., v. Union of India, reported in 2002 (143) E.L.T. page 38, a Division Bench of the Delhi High Court on the identical issue held thus:- Section 3A of the Act permits assessment of duty on the basis of production capacity. Section 3A(4) of the Act provides for reduction of duty in case of act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttached to a stenter shall not be deemd to be one chamber of a stenter. Explanation-I to Rule 5 is as under :- "Explanation-I : For the purposes of this notification, a float drying machine or any other equipment, except the galleries, of a length 3.05 metres installed in or attached to a stenter for aiding the process of heat setting or drying of the fabrics shall be deemed to be one chamber of a stenter and any fraction of such length shall be computed on pro rata basis." The aforesaid Explanation makes it clear that the galleries are required to be excluded while taking into consideration the flat drying machines or any other equipment which is installed in or attached to a stenter for aiding the process of heat setting or drying of the fabrics. xxxxxx It is to be stated that in exercise of the powers conferred under Section 3A of the Act, the 1998 Rules were framed, which came into force on 10th December, 1998. Those rules were superseded by the Rules, 2000, which came into effect from 1st March, 2000. As such, there is not much difference between these Rules. The aforesaid Rules are also deleted from 1st March 2000 and no new Rules were framed. Thereafter, Section 3A w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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