1981 (8) TMI 75 - HC - Central Excise

Additional duty - Viscose staple fibre and non-cellulosic fibre - Writ jurisdiction - Natural justice - Countervailing duty - Interpretation

Summary

Issues Involved:

1. Obligation of Government of India to levy additional duty equivalent to excise duty on imported articles.
2. Validity of notifications issued by the Government of India.
3. Locus standi of the petitioners.
4. Territorial jurisdiction of the Gujarat High Court.
5. Requirement of demand for justice and denial thereof.
6. Power of Central Government to exempt from additional duty.
7. Alleged violation of Articles 14, 19(1)(g), and 265 of the Constitution.

Issue-wise Detailed Analysis:

1. Obligation of Government of India to levy additional duty equivalent to excise duty on imported articles:
The main question was whether the Government of India is obligated to levy an "additional duty" equivalent to the excise duty on articles imported into India if a like article manufactured in India is subjected to excise duty. The court examined Section 3(1) of the Customs Tariff Act, 1975, which mandates that any article imported into India shall be liable to an additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India. The court also considered the historical and economic background of the additional duty, originally known as "countervailing duty," intended to protect indigenous industries by balancing the excise duty levied on domestically manufactured articles.

2. Validity of notifications issued by the Government of India:
The petitioners challenged three notifications issued by the Government of India on January 5, 1979, October 30, 1979, and June 19, 1980, on the grounds that the additional duty levied was not equivalent to the excise duty on viscose staple fibre manufactured in India. The court held that the power to exempt from additional duty is conferred by Section 3(6) of the Customs Tariff Act, which incorporates the provisions of the Customs Act, 1962, including those relating to exemptions. The court found that the Central Government had the power to issue the impugned notifications and that the exercise of this power was in the public interest.

3. Locus standi of the petitioners:
The petitioners, being consumers of viscose staple fibre, contended that they had a direct interest in the matter as the excise duty impacts the cost of yarn and fabric they produce. The court held that the petitioners had sufficient interest to maintain the petition, as under Section 64-A of the Sale of Goods Act, excise duty is payable by the purchaser in addition to the stipulated price, making the purchasers interested in ensuring competitive pricing.

4. Territorial jurisdiction of the Gujarat High Court:
The court addressed the contention that the Gujarat High Court lacked jurisdiction as the factories of Gwalior Rayon and South India Viscose were located in Madhya Pradesh and Kerala, respectively. The court held that while it could not grant relief regarding the excise duty collected in Madhya Pradesh, it could grant relief under Clause (b) of the petition, which would enable the petitioners to compete better with manufacturers using imported viscose staple fibre.

5. Requirement of demand for justice and denial thereof:
The court noted that the prerequisite of a demand for justice and its denial applies strictly to writs of mandamus but not to other writs. The petitioners challenged the delegated legislation, and although representations were made by the Spinning Mills and Handloom and Powerloom industry, no relief was granted regarding the additional duty on imported viscose staple fibre.

6. Power of Central Government to exempt from additional duty:
The court examined the power of the Central Government to grant exemptions from additional duty under Section 3(6) of the Customs Tariff Act, read with Section 25 of the Customs Act. The court found that the Central Government had the power to issue the necessary notifications for exemptions, provided it was satisfied that it was in the public interest. The court emphasized the need for a wide latitude for the Central Government to make changes in revenue levies to address changing situations.

7. Alleged violation of Articles 14, 19(1)(g), and 265 of the Constitution:
The court addressed the challenge on the grounds of Articles 14, 19(1)(g), and 265 of the Constitution. It held that the State has wide discretion in selecting persons or objects for taxation, and a statute is not open to attack on the ground that it taxes some persons and objects and not others. The court found no violation of Article 14 as the law did not operate unequally within the range of its selection. Regarding Article 19(1)(g), the court held that the power to make exemptions under the Central Excise Rules and the Customs Act was a reasonable exercise of power. Lastly, the court held that there was no violation of Article 265 as the additional duty and excise duty were collected in accordance with the law.

Conclusion:
The court dismissed both petitions, holding that the Central Government had the power to issue the impugned notifications and that the exercise of this power was in the public interest. The court granted leave to appeal to the Supreme Court under Article 133(1) of the Constitution, recognizing that the interpretation of Section 3(6) read with Section 25 of the Customs Act involved a substantial question of law of general importance.