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2016 (7) TMI 1074 - HC - Central ExciseLapsing of credit of duty lying unutilised with the manufacturer from a specified date. - Held that - It appears that in their wisdom, the Central Government sought to balance the rationalisation of duty structure and provide flexibility in the use of credit by lapsing the accumulated credit which was admittedly a product of the earlier duty structure. Viewed from the aforesaid perspective, we are unable to hold that the making of Rule 57F(4A) was so irrational or unreasonable as to fall foul of the Constitution of India. As to how, a fiscal legislation is to be framed is not an area where any interference under Article 226 is warranted. Scope of judicial review in respect of fiscal legislation is limited to the extent of determining whether it is outside the legislative competence of the legislature to enact such legislation and/or whether such enactment is so unreasonable and irrational so as to violate the rights guaranteed under the Constitution. In the present case, we are unable to accept that the legislative policy in aid of which Rule 57F(4A) was made, is irrational or unreasonable. - Decided against the assessee.
Issues Involved
1. Validity of Sections 131(b), 132(1)(a), and 132(2) of the Finance Act, 1999. 2. Validity of Sub-rule (4A) of Rule 57F of the Central Excise Rules, 1944. 3. Whether the retrospective application of Rule 57F(4A) is constitutionally valid. 4. Whether Rule 57F(4A) violates Article 14, 19(1)(f), and 19(1)(g) of the Constitution of India. Issue-Wise Detailed Analysis 1. Validity of Sections 131(b), 132(1)(a), and 132(2) of the Finance Act, 1999 The Petitioners challenged Sections 131(b), 132(1)(a), and 132(2) of the Finance Act, 1999, claiming these provisions were ultra vires the Constitution of India. Section 131(b) introduced clause (xxviii) in Sub-section 2 of Section 37 of the Central Excise Act, 1944, empowering the Central Government to make rules for the lapsing of unutilized credit. Sections 132(1)(a) and 132(2) were enacted to validate Sub-rule (4A) of Rule 57F, which had been previously invalidated by the Supreme Court in Eicher Motors Pvt. Ltd. v. Union of India. 2. Validity of Sub-rule (4A) of Rule 57F of the Central Excise Rules, 1944 Sub-rule (4A) of Rule 57F mandated the lapsing of MODVAT credit for certain excisable goods as of 16.03.1995. The Supreme Court in Eicher Motors Pvt. Ltd. held this rule to be beyond the rule-making power of the Central Government. The impugned provisions of the Finance Act, 1999, were enacted to overcome this decision and validate the lapsing of accumulated MODVAT credit. 3. Retrospective Application of Rule 57F(4A) The Parliament enacted Rule 57F(4A) to be effective from 16th March 1995. Sub-section (2) of Section 132 of the Finance Act, 1999, contains express provisions for sustaining any action in relation to the lapsing of credit of duty lying unutilized with the manufacturer. The Court observed that retrospective legislation is permissible if it cures defects in an earlier invalid legislation and the legislature has the competence over the object of the legislation. The retrospective operation of the Finance Act, 1999, was held valid as it cured the defect identified by the Supreme Court in Eicher Motors Pvt. Ltd. 4. Violation of Article 14, 19(1)(f), and 19(1)(g) of the Constitution The Petitioners argued that Rule 57F(4A) was arbitrary and unreasonable, violating their rights under Article 14, 19(1)(f), and 19(1)(g) of the Constitution. The Court noted that tax legislations are not immune from being challenged on grounds of unreasonableness and violation of constitutional rights. However, the Court held that Rule 57F(4A) was part of a rationalization of the excise duty structure and was not so irrational or unreasonable as to violate the Constitution. The Court emphasized that the legislative policy in aid of which Rule 57F(4A) was made was not irrational or unreasonable. Conclusion The petitions challenging the validity of Sections 131(b), 132(1)(a), and 132(2) of the Finance Act, 1999, and Sub-rule (4A) of Rule 57F of the Central Excise Rules, 1944, were dismissed. The Court upheld the retrospective validation of Rule 57F(4A) and found that it did not violate the constitutional rights of the Petitioners. The legislative policy behind the rule was deemed rational and reasonable, and the additional burden on the Petitioners was not sufficient grounds for invalidating the rule.
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