1986 (3) TMI 81 - HC - Central Excise

Summary

Issues Involved:
1. Levy of excise duty on yarn manufactured and consumed within the factory.
2. Validity of amendments to Rules 9 and 49 of the Central Excise Rules, 1944.
3. Retrospective effect of Section 51 of the Finance Act of 1982.
4. Constitutionality of retrospective legislation under Article 14 and Article 20 of the Constitution.

Issue-wise Detailed Analysis:

1. Levy of Excise Duty on Yarn Manufactured and Consumed within the Factory:
The petitioner, a composite textile mill, challenged the levy of excise duty on yarn manufactured and consumed within its factory premises. The petitioner relied on the Delhi High Court rulings in DCM's case and J.K. case, arguing that yarn not removed from the factory was not dutiable. Conversely, the respondents cited the Gujarat High Court's ruling in Maneklal's case, asserting that yarn manufactured and consumed within the factory was separately dutiable under the Central Excises and Salt Act of 1944.

The court emphasized the principle that excise duty is a tax on the manufacture or production of goods, as established in R.C. Jall Parsi v. Union of India and Union of India v. Bombay Tyre International Limited. The court concluded that intermediate goods manufactured within a factory, whether consumed in the manufacture of other products or not, are separately chargeable to duty under the Act. Thus, the petitioner's plea was rejected.

2. Validity of Amendments to Rules 9 and 49 of the Central Excise Rules, 1944:
The court examined the amendments made to Rules 9 and 49, which clarified that excisable goods consumed or utilized within the factory are deemed to have been removed from the factory for the purpose of excise duty. The court found that these amendments were introduced to overcome the effect of the Delhi High Court rulings and were consistent with the charging section of the Act.

The court held that the amendments to Rules 9 and 49 did not introduce any new concept but merely clarified the existing legal position. Therefore, the amendments were valid and did not affect the chargeability of duty on yarn manufactured and consumed within the factory.

3. Retrospective Effect of Section 51 of the Finance Act of 1982:
Section 51 of the Finance Act of 1982 gave retrospective effect to the amendments made to Rules 9 and 49, validating all actions taken under the Central Excises Act and the Central Excise Rules, 1944, from the date of their inception. The petitioner argued that this retrospective effect was ultra vires of the Act and violated constitutional principles.

The court held that Parliament, in exercising its plenary legislative powers, was competent to legislate retrospectively. The retrospective effect given to the amendments was within the legislative competence of Parliament and was necessary to address the extraordinary situation created by the High Court rulings. The court found no merit in the petitioner's contention and upheld the validity of Section 51.

4. Constitutionality of Retrospective Legislation under Article 14 and Article 20 of the Constitution:
The petitioner argued that the retrospective effect of the amendments exposed it to penalties and confiscation of goods, violating Article 14 and Article 20 of the Constitution. The court noted that the explanation to Section 51 expressly provided that no act or omission would be punishable if it was not so punishable before the amendments.

The court held that the retrospective legislation did not violate Article 14 or Article 20, as it did not impose any new penalties or criminal liabilities. The court reiterated that Parliament's power to legislate retrospectively was well-settled and could not be deemed unconscionable or arbitrary.

Conclusion:
The court dismissed the writ petition, holding that the petitioner was liable to pay excise duty on yarn manufactured and consumed within its factory. The amendments to Rules 9 and 49 and the retrospective effect given by Section 51 of the Finance Act of 1982 were upheld as valid and constitutional. The court granted a certificate of fitness to appeal to the Supreme Court and stayed the operation of its order for two months, continuing the interim order during this period.