1977 (10) TMI 107 - HC - Central Excise

Issues Involved:
1. Maintainability of the writ application.
2. Validity of the Explanation in Notification No. 88/77.
3. Demand of excise duty on 'Jalsa' brand footwears.

Detailed Analysis:

1. Maintainability of the Writ Application:
The respondents challenged the maintainability of the writ application on three grounds: the application had become infructuous due to a subsequent notification, the constitutional validity of a Central law cannot be challenged in the High Court, and the petitioner had not exhausted alternative remedies.

Infructuous Argument: The issuance of Notification No. 269/77, which deleted the offending explanation, did not retrospectively nullify the demand for excise duty for the period from May 9, 1977, to August 8, 1977. Therefore, the writ application was not infructuous.

Constitutional Validity Argument: The High Court examined Articles 226(3), 131A, 226A, and 228A, concluding that the challenge to the notification was not about its constitutional validity but about it being ultra vires the rule-making power and the charging section of the Act. The High Court maintained jurisdiction to entertain the writ application as the challenge was not on constitutional grounds.

Exhaustion of Alternative Remedies: The High Court noted that the alternative remedy under Sections 35, 35A, and 36 of the Act was not adequate as the authorities under the Act could not declare a notification ultra vires. The remedy was deemed illusory, and the writ application was thus maintainable.

2. Validity of the Explanation in Notification No. 88/77:
The petitioner argued that the explanation appended to Notification No. 88/77 was ultra vires Rule 8(1) of the Central Excise Rules and Section 3 of the Central Excises and Salt Act, 1944.

Rule 8(1) of the Rules: The Central Government can exempt excisable goods from duty but cannot impose duty on non-manufacturers. The explanation in the notification deemed footwear affixed with another manufacturer's brand or purchased by another manufacturer as being manufactured by that other manufacturer, which was beyond the scope of the delegated authority.

Section 3 of the Act: Excise duty is levied on the manufacture or production of goods. The explanation attempted to shift the incidence of duty to non-manufacturers, which was contrary to the charging section of the Act.

The High Court held that the explanation was ultra vires both Rule 8(1) and Section 3 of the Act and quashed it.

3. Demand of Excise Duty on 'Jalsa' Brand Footwears:
The petitioner contended that the demand for excise duty on 'Jalsa' brand footwears was based on the ultra vires explanation in Notification No. 88/77.

Petitioner's Stand: The petitioner was a mere purchaser of 'Jalsa' brand footwears manufactured by small-scale manufacturers who were exempt from excise duty. The demand notices were issued based on the explanation in the notification, which was invalid.

Respondents' Stand: The respondents argued that the small-scale manufacturers were ancillaries of the petitioner, manufacturing footwears mostly for the petitioner from parts supplied by the petitioner, and thus the petitioner was liable for the duty.

The High Court found that the demand notices were issued based on the explanation in Notification No. 88/77, which was ultra vires. Consequently, the demand notices were also quashed.

Conclusion:
The High Court allowed the writ application, quashing the explanation in Notification No. 88/77 and the related demand notices for excise duty on 'Jalsa' brand footwears. The application was maintainable as the alternative remedy was inadequate, and the challenge was not on constitutional grounds but on the validity of the notification under the rule-making power and the charging section of the Act.

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