2022 (10) TMI 500 - HC - Central Excise

Levy of excise duty or NCCD - tobacco and tobacco products - levy under which act after transition to GST regime - grant of exemption by way of N/N. 11/2017 dated 30.06.2017 - HELD THAT - The levy of excise duty on tobacco and tobacco products is a matter of public policy and this Court in exercise of writ jurisdiction would not interfere with the same. The CGST itself contemplates levy of excise duty upon tobacco and tobacco products apart from they being taxed under the provisions of CGST. There is no error in the same. Thus, the respondents are entitled to levy CGST as well as excise duty on tobacco and tobacco products. Whether when excise duty is exempted, can NCCD be leviable under the provisions of Section 136 of the Finance Act, 2001? - HELD THAT - NCCD is a surcharge of the excise duty. The case of the petitioners is that, when excise duty is not levied, NCCD cannot be levied and there was no excise duty on tobacco and tobacco products from 01.07.2017 to 06.07.2019 and NCCD could not have been levied during the said period - Surcharge is an additional charge or payment. Section 136 of the Finance Act, 2001 contemplates levying and collecting NCCD, which is considered as a surcharge, a duty of excise. Thus NCCD is not contemplated in Section 136 as a levy on the excise duty levied under the Central Excise Act, but a separate duty being levied on the value of the goods manufactured or produced and it is a type of excise duty. The Finance Act, 2001 sought to levy NCCD on the goods as described in the Seventh Schedule. For better clarification, reference is made out in the Central Excise Act. Repealing of the Central Excise Act does not absolve the petitioners paying NCCD as determined under the Seventh Schedule - NCCD is a surcharge and a type of excise duty which can be levied independently of the excise duty as contemplated under the provisions of Fourth schedule to the Central Excise Act, 1944. Thus levy of NCCD in the absence of levy of excise duty cannot be considered as bad in law. Petition dismissed.

Summary

Issues Involved:
1. Imposition of Excise Duty and National Calamity Contingent Duty (NCCD) on tobacco products.
2. Constitutionality and legality of Section 174 of the Central Goods and Services Tax (CGST) Act, 2017.
3. Validity of Notification No. 3/2019 dated 06.07.2019 levying excise duty on tobacco products.
4. Legality of Section 136 of the Finance Act, 2001 regarding NCCD.
5. Refund of NCCD collected from the petitioners.

Detailed Analysis:

1. Imposition of Excise Duty and NCCD on Tobacco Products:
The petitioners, manufacturers of tobacco products, contested the imposition of Excise Duty and NCCD on their products. They argued that with the enactment of the CGST Act, 2017, which sought to consolidate indirect taxes, the imposition of additional excise duty and NCCD was unwarranted. The court, however, noted that tobacco products fall under Entry 84 of the Union List of the Seventh Schedule of the Constitution, which allows the levy of excise duty on such products even after the implementation of the CGST Act, 2017. The court upheld the levy of both GST and excise duty on tobacco products, stating it is a matter of public policy and not subject to judicial interference.

2. Constitutionality and Legality of Section 174 of the CGST Act, 2017:
The petitioners challenged Section 174 of the CGST Act, 2017, which repeals the Central Excise Act, 1944, except for goods under Entry 84 of the Union List. The court highlighted that Section 174 explicitly allows for the continuation of excise duty on tobacco products, as they are included in Entry 84. The court found no constitutional infirmity in Section 174, affirming that it does not violate any legal principles.

3. Validity of Notification No. 3/2019 dated 06.07.2019:
The petitioners sought to quash Notification No. 3/2019, which reintroduced excise duty on tobacco products at a rate of 0.5%. The court examined the legislative intent and the provisions of the CGST Act, 2017, and concluded that the notification was valid. The court noted that the CGST Act, 2017, and subsequent notifications were in line with the legislative framework allowing the imposition of excise duty on tobacco products.

4. Legality of Section 136 of the Finance Act, 2001 Regarding NCCD:
The petitioners argued that NCCD, being a surcharge on excise duty, should not be levied when excise duty is exempted. The court referred to Section 136 of the Finance Act, 2001, which allows NCCD to be levied independently of the Central Excise Act. The court cited the Supreme Court's decision in Unicorn Industries vs. Union of India, which clarified that the exemption of one type of duty does not automatically exempt other duties. The court upheld the legality of Section 136, stating that NCCD is a type of excise duty that can be levied independently.

5. Refund of NCCD Collected from the Petitioners:
The petitioners sought a refund of the NCCD collected from them, arguing that it was unlawfully levied. The court dismissed this claim, reiterating that NCCD is a valid levy under the Finance Act, 2001, and its collection was lawful. The court found no grounds to order a refund of the NCCD collected.

Conclusion:
The court dismissed the writ petitions, upholding the imposition of excise duty and NCCD on tobacco products. The court affirmed the constitutionality and legality of the relevant provisions of the CGST Act, 2017, and the Finance Act, 2001, and validated the contested notification. The respondents were found to be within their rights to levy and collect both excise duty and NCCD on tobacco products.