9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (11) TMI 954 - HC - Central ExciseEffect of omission of Section 3A - Whether any obligation or liability incurred under Section 3A of the Act is saved by Section 6 of the General Clauses Act - held that - in view of the language contained in the notification dated 1st March, 2001, the same can only afford protection to action already taken while Rule 96ZQ was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. Any obligation or liability etc. acquired, accrued or incurred under Section 3A of the Act would not be saved by Section 6 of the General Clauses Act. When the charging Section itself is deleted without any saving clause, no recovery under the said Section can be made by resorting to Rule 96ZQ of the Rules. Action, if any, can be taken only under the regular provisions of the Act. Even in case of proceedings initiated prior to the omission of Rule 96ZQ, 96ZP and 96ZO of the Rules, if the same were not concluded prior to the omission of Section 3A of the Act, there was no power to proceed further and conclude the same. Under the circumstances, any action taken under Rules 96ZQ, 96ZO and 96ZP of the Rules after Section 3A of the Act came to be omitted from the statute book without any saving clause, would be without authority of law and as such any orders passed in respect thereof after the omission of Section 3A of the Act would be non est. Virus of penalty provision - held that - manufacturers of goods specified under Section 3A of the Act are evidently subjected to harsh treatment of unreasonable penalty under Rule 96ZQ(5)(ii) compared to manufacturers of other excisable goods. Moreover, considering the nature of the penalty prescribed even for one day s delay, it is apparent that the said provision would amount to imposition of an unreasonable restriction on the petitioners right to conduct business thereby rendering the said provision as violative of Article 19(1)(g) of the Constitution. - In the light of the above discussion, this court is of the view that clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as well as Section 37 of the Central Excise Act and is beyond the authority of the rule making power of the Central Government and as such, is required to be struck down.
Issues Involved:
1. Constitutional validity of Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944. 2. Continuation of proceedings under Rule 96ZQ(5)(ii)/96ZP(3) after their omission. 3. Validity of orders imposing penalties under Rule 96ZQ(5)(ii)/96ZP(3) post-omission. 4. Applicability of Section 6 of the General Clauses Act and Section 38A of the Central Excise Act to omitted provisions. 5. Whether the Supreme Court decision in Union of India v. Supreme Steels and General Mills Ltd. concludes the controversy. Detailed Analysis: 1. Constitutional Validity of Rule 96ZQ(5)(ii): - Rule 96ZQ(5)(ii): The petitioners challenged the imposition of penalties equal to the amount of duty outstanding, arguing that it is ultra vires the Constitution and the Central Excise Act. - Court's Finding: The court held that Rule 96ZQ(5)(ii) is ultra vires Articles 14, 19(1)(g), and 265 of the Constitution. The rule imposes a mandatory penalty without discretion, treating minor delays the same as significant delays, which violates the principle of equality and imposes unreasonable restrictions on the right to conduct business. - Legal Basis: The court noted that penalty provisions should be clear, specific, and authorized by law. Section 37(3) of the Act limits the penalty to Rs. 5,000, and Rule 96ZQ(5)(ii) exceeds this limit, making it beyond the rule-making power of the Central Government. 2. Continuation of Proceedings Post-Omission: - Rule 96ZQ/96ZP Omission: The rules were omitted by Notification No. 6/2001-C.E. (N.T.), dated 1st March 2001, and Section 3A was omitted by the Finance Act, 2001, effective 11th May 2001. - Court's Finding: Proceedings initiated under the omitted rules could not continue post-omission. The court held that the omission of rules without a saving clause means that no new proceedings could be initiated or continued. - Legal Precedents: The court relied on the Supreme Court's decisions in M/s. Rayala Corporation Pvt. Ltd. v. Director of Enforcement and Kolhapur Canesugar Works Ltd. v. Union of India, which held that Section 6 of the General Clauses Act applies to repeals, not omissions. 3. Validity of Orders Imposing Penalties Post-Omission: - Impugned Orders: The orders imposing penalties were issued after the omission of Rule 96ZQ/96ZP and Section 3A. - Court's Finding: The court quashed the orders as being without authority of law. The omission of Section 3A without a saving clause meant that any pending proceedings under the omitted rules could not be concluded. 4. Applicability of Section 6 of the General Clauses Act and Section 38A of the Central Excise Act: - Section 6 of the General Clauses Act: The court held that Section 6 does not apply to omissions, only to repeals. - Section 38A of the Central Excise Act: This section, inserted by the Finance Act, 2001, applies to amendments, repeals, supersessions, or rescissions but not to omissions. Therefore, it does not save obligations or liabilities under omitted rules or sections. 5. Supreme Court Decision in Union of India v. Supreme Steels and General Mills Ltd.: - Contention: The Revenue argued that this decision concluded the issue. - Court's Finding: The court held that the Supreme Court decision did not address the issue of the validity of proceedings post-omission. The decision was based on a consensus and did not consider the jurisdictional issue raised in the present case. - Jurisdictional Challenge: The court noted that a jurisdictional challenge can be raised at any stage, and the petitioners were not precluded from raising it in the writ proceedings. Conclusion: The Gujarat High Court quashed the impugned orders as being without authority of law due to the omission of Rule 96ZQ/96ZP and Section 3A. The court also declared Rule 96ZQ(5)(ii) ultra vires the Constitution and beyond the rule-making power of the Central Government. The decision emphasized the importance of clear legislative authority for imposing penalties and the non-applicability of saving provisions to omissions.
|
