1978 (10) TMI 40 - HC - Central Excise

Summary

Issues:
Challenge to adjustment of excise duty rate from Advance Duty Account for a specific period.

Analysis:
The judgment involves two writ petitions concerning the adjustment of excise duty rates from the Advance Duty Account of the petitioners for a specific period. The auctions for wholesale vendor licenses were held in March 1978 for Ghaziabad and Lucknow. The State Government later enhanced the excise duty rate from Rs. 40 to Rs. 55 per litre through a notification dated April 17, 1978. The petitioners challenged the adjustment of excise duty at the increased rate for the period between April 1, 1978, and April 16, 1978. The key contention was that excise duty could only be recovered at the rate in force at the time of consumption, i.e., Rs. 40 per litre until April 16, 1978.

The court analyzed the constitutional aspect of tax collection under Article 265, emphasizing that taxes must be levied as per the law. The rate of excise duty could only be altered through a notification by the State Government under the U.P. Excise Act. The judgment cited the Excise Commissioner, U.P. v. Ram Kumar case to establish that demands for excise duty must align with legal provisions and cannot be collected arbitrarily. It was held that the increased rate of excise duty was applicable only from April 17, 1978, not for the period prior.

Furthermore, the court addressed the argument that the petitioners might have collected excise duty at the increased rate from dealers during the disputed period. Citing Abdul Quader & Co. v. Sales Tax Officer, the court clarified that unauthorized collections cannot be validated by a notice and must adhere to the legal framework. The judgment emphasized that the collection of excise duty at the increased rate without legal backing was impermissible.

Consequently, the court allowed both writ petitions, directing the respondents to adjust the excise duty back to Rs. 40 per litre in the Advance Duty Account for the period in question. The adjustment was to be made within a month from the date of the judgment, and no costs were awarded in the case. The decision reaffirmed the principle that tax collection must be in accordance with the law in force at the time of the transaction, highlighting the importance of legal validity in revenue collection processes.