1991 (7) TMI 103 - HC - Central Excise

Summary

Issues Involved:
1. Challenge to the levy of additional duties of excise.
2. Constitutional validity of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
3. Notifications issued under the Central Excises and Salt Act, 1944.
4. Distribution of additional duties among States.
5. Doctrine of colourable legislation and legislative competence.
6. Interim orders and their impact on public revenue.

Summary:
1. Challenge to the Levy of Additional Duties of Excise:
The petitioners, job processors of cotton/man-made fabrics, challenged the levy of additional duties of excise u/s the Additional Duties of Excise (Goods of Special Importance) Act, 1957. They argued that this levy was ultra vires Article 366 (29A) read with Articles 246 and 274 of the Constitution, claiming it was in lieu of sales tax, a State subject under Entry 54 of List II.

2. Constitutional Validity of the Additional Duties of Excise (Goods of Special Importance) Act, 1957:
The respondents contended that the Act was relatable to Entries 84 and 97 of the Union List (List I) and had been upheld by the Supreme Court in M/s. Ujagar Prints v. Union of India. The court held that the additional duties of excise under the Act fell within the scope of Article 272 of the Constitution and were valid Union duties of excise.

3. Notifications Issued Under the Central Excises and Salt Act, 1944:
The petitioners initially challenged notifications issued under the Central Excises and Salt Act, 1944, but later focused solely on the constitutional validity of the Additional Duties Act itself. The court noted that under Article 255, an Act of Parliament is not invalid solely because the President's recommendation was not obtained if the President later assented to the Act.

4. Distribution of Additional Duties Among States:
The court examined the distribution mechanism of additional duties among States as per the Second Schedule of the Act, noting that States levying sales tax on the commodities covered by the Act would not receive a share of the additional duties unless directed otherwise by the Central Government. This principle was found to be in accordance with Article 272 of the Constitution.

5. Doctrine of Colourable Legislation and Legislative Competence:
The petitioners argued that the Act was a colourable piece of legislation, essentially imposing a sales tax under the guise of excise duty. The court rejected this argument, stating that the Act's plain language clearly imposed a Union duty of excise, not a sales tax, and was within the legislative competence of Parliament under Entries 84 and 97 of the Union List.

6. Interim Orders and Their Impact on Public Revenue:
The court criticized the interim orders that allowed petitioners to pay only half the duty and furnish bank guarantees for the rest, resulting in significant revenue loss. The court ordered the encashment of bank guarantees and payment of interest at 17.5% per annum on the due amounts, emphasizing the need to restore public revenue and prevent petitioners from profiting at the public's expense.

Conclusion:
The writ petitions were dismissed with costs, and the court upheld the constitutional validity of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, as a valid Union duty of excise. The interim orders were vacated, and the petitioners were ordered to pay the due amounts with interest.