1971 (12) TMI 116 - HC - Central Excise

Issues Involved:
1. Validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956.
2. Whether Rule 12 is retroactive and lacks a period of limitation.
3. Impact of non-collection of excise duties by the petitioner between 1961 and July 1965.
4. Reasonableness and validity of Rule 12.
5. Whether Rule 12 violates Article 14 of the Constitution.
6. Disparity in excise duty rates for medicinal preparations with different alcohol content.

Issue-wise Detailed Analysis:

1. Validity of Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956:
The primary contention was whether Rule 12 is ultra vires the Act. The petitioners argued that Rule 12, which allows for the collection of any duty or deficiency in duty that has been short-levied, is beyond the scope of the Act and should be struck down. They claimed that the rule extends the charging power under Section 3 of the Act, which should be provided by Parliament itself and not through delegated legislation.

2. Whether Rule 12 is retroactive and lacks a period of limitation:
The petitioners contended that Rule 12 is retroactive in nature and does not prescribe any period of limitation, making it invalid. They argued that a law with retrospective effect cannot be made by a delegated authority and that the lack of a limitation period renders the rule unreasonable and void.

3. Impact of non-collection of excise duties by the petitioner between 1961 and July 1965:
The petitioners argued that since they had not collected excise duties from their customers during this period, they could not be compelled to pay such duties now. They asserted that their right to recoup the payment had been lost, making the rule unreasonable and void.

4. Reasonableness and validity of Rule 12:
The petitioners also claimed that Rule 12 is unreasonable and invalid as it vests arbitrary and unguided power in the appropriate officer, violating Article 14 of the Constitution. They argued that the rule allows for the collection of duties without any specific guidelines or limitations, leading to potential misuse.

5. Whether Rule 12 violates Article 14 of the Constitution:
The petitioners contended that Rule 12 violates Article 14 of the Constitution as it results in unequal treatment. They pointed out that medicinal preparations containing a large percentage of alcohol, which could be consumed as an alcoholic beverage, are charged at a low rate, while a very high rate of duty is levied on the same medicine with a small percentage of alcohol.

6. Disparity in excise duty rates for medicinal preparations with different alcohol content:
The petitioners highlighted the disparity in excise duty rates for medicinal preparations with different alcohol content. They argued that this disparity is unreasonable and violates Article 14 of the Constitution, as it results in unequal treatment of similar products.

Judgment Summary:

The court addressed the main question of whether Rule 12 is ultra vires. It was contended that Rule 12 applies only to cases of short levy and not to nil levy. The court referred to a prior decision by Ramakrishnan, J., which had become final and held that the demand made on the petitioner falls under the residuary power under Rule 12, and therefore, the provision about limitation contained in Rule 9 will not apply.

The court also considered the interpretation of Rules 9, 10, and 10-A framed under Section 37 of the Central Excise and Salt Act, 1944, which substantially correspond to Rules 9, 11, and 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956. The Supreme Court had held that even when no duty had been assessed, the entire duty when subsequently assessed would be a short-levy, and Rule 12 would apply to both cases of short levy and nil levy.

The court further addressed the principle of res judicata, citing the Supreme Court's decision in Sobhag Singh and Ors. v. Jai Singh and Ors., which held that a previous decision on a matter in issue is res judicata and cannot be reopened. However, the court noted that the principle of res judicata does not apply to matters relating to jurisdiction or when there is a subsequent change in law by statute or by reason of a later decision of the Supreme Court.

The court ultimately held that Rule 12, in so far as it seeks to extend the charging power under Section 3 of the Act, is invalid and without jurisdiction. The court also noted that the judgment of Ramakrishnan, J., did not consider this aspect and therefore, the notices issued seeking to assess the petitioner were without jurisdiction.

The rule nisi issued was made absolute, and there was no order as to costs.

← Previous Next →