2006 (7) TMI 644 - HC - Central Excise

Issues Involved:
1. Constitutionality of Section 3A of the Central Excise Act, 1944.
2. Validity of Rule 3 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997.
3. Validity of Rule 3 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998.
4. Whether the withdrawal of Section 3A and related rules affects pending actions.
5. Legality of the orders passed by the authorities under the challenged rules.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 3A of the Central Excise Act, 1944:
The petitioners argued that Section 3A is ultra vires the Constitution, specifically Entry 84 of the Union List of the Seventh Schedule, as it imposes a levy based on production capacity rather than actual production. The court referred to the Supreme Court's judgment in *Commissioner of Central Excise & Customs vs. Venus Castings (P) Ltd.*, which clarified that Section 3A levies duty on production, with the measure of tax based on actual production or another basis. The court concluded that Section 3A is constitutionally valid as it relates to the production of goods and not on a hypothetical basis.

2. Validity of Rule 3 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997:
The petitioners contended that Rule 3 is unintelligible and discriminatory, failing to account for differences in machinery age and technology. The court examined Rule 3, which requires manufacturers to declare specific parameters to determine production capacity. The court found the rule to be intelligible and workable, as it allows for verification by the Commissioner and consultation with technical authorities. The court dismissed the challenge, stating that the rule is not ultra vires Section 3A.

3. Validity of Rule 3 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998:
The petitioners relied on a single judge's decision in *Beauty Dyes vs. Union of India*, which found Rule 3 of the Hot Air Stenter Rules ultra vires Section 3A. The court disagreed with this reasoning, emphasizing that Section 3A and the rules provide a complete code for determining production capacity and levying duty. The court upheld the validity of Rule 3, stating that it aligns with the legislative intent and is not ultra vires.

4. Whether the withdrawal of Section 3A and related rules affects pending actions:
The petitioners argued that the omission of Section 3A and the repeal of related rules should nullify pending actions. The court noted the lack of pleadings on this issue and emphasized that arguments must be supported by proper pleadings. The court did not entertain this argument due to procedural deficiencies.

5. Legality of the orders passed by the authorities under the challenged rules:
The court refused to examine the correctness of the orders passed by the authorities, stressing that challenges to the vires of the Act should not be used to bypass the established appellate process. The court highlighted the importance of following the prescribed legal procedures and refrained from interfering with the merits of the orders.

Conclusion:
The court dismissed all petitions, upholding the constitutionality of Section 3A and the validity of the challenged rules. The court imposed costs of Rs. 10,000/- for each case and provided the petitioners with the liberty to approach the appropriate appellate forum for further challenges.

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