1996 (1) TMI 448 - HC - Central Excise

Summary

Issues:
Challenge to recovery notices dated 11-3-1992 and 6-11-1992 issued to Gujarat State Textile Corporation Ltd. regarding Priyalaxmi Mills and New Swadeshi Mills, interpretation of excise duty recovery under Gujarat Act No. 10 of 1986, consideration of Central Excise and Salt Act, 1944 provisions, and examination of Rule 230 of Central Excise Rules.

Detailed Analysis:

1. The Gujarat State Textile Corporation Ltd. challenged recovery notices regarding Priyalaxmi Mills and New Swadeshi Mills, which were revived under Gujarat Act No. 10 of 1986. The Act transferred rights of textile undertakings to the State Government, raising questions on liability for dues.

2. The petitioner argued that dues should be handled by the Commissioner of Payment under the Act, suggesting that excise duty recovery is limited to State Acts, not Central Acts, as per Article 246 of the Constitution.

3. The respondents contended that excise duty referred to in Category II or III includes local Acts like the Bombay Prohibition Act, emphasizing Parliament's exclusive power for matters in the Union List under Article 248 of the Constitution.

4. Previous judgments by a Division Bench supported the petitioner's stance, highlighting the obligation of the Corporation to discharge liabilities under Schedule II of the Act, including excise duty, as per Section 11 of the Central Excises and Salt Act, 1944.

5. The Court analyzed the constitutional provisions and exceptions under Article 246, stating that State legislatures can enact laws only for matters not in the Union List. It clarified that excise duty under the State Act differs from that under the Central Act, emphasizing Parliament's exclusive authority in levying excise duty.

6. Rule 230 of the Central Excise Rules was examined, particularly sub-rule (2), which addresses duty payment obligations in cases of business transfer or ownership change. The Court emphasized the distinction between voluntary transfers and acquisitions under the Act.

7. The Court set aside the recovery notices, directing authorities to reevaluate the duty payment obligations in light of the nationalization of Priyalaxmi Mills and the specific provisions of the Act. The authorities were instructed to consider the effect of ownership transfer post-nationalization.

8. The judgment allowed the petition, making the rule absolute to the extent specified, indicating a favorable outcome for the Gujarat State Textile Corporation Ltd. regarding the recovery notices and duty payment obligations.