1969 (8) TMI 33 - SC - Central Excise

Validity and legality of the levy of cess by way of excise duty on the rubber used by manufacturers of chappals under the provisions of the Rubber Act, 1947, (Act XXIV of 1947) challenged Held that - We find it difficult to endorse the reading of sub-section (1) and sub-section (2) of Section 12 in isolation. Not only the statute but also the section have to be read as a whole and together, and in our judgment whatever be the nature of duty, Parliament would undoubtedly have legislative competence under Entry 97 of List I in the Seventh Schedule read with Article 248 of the Constitution. The substantive provisions of sub-sections (4), (5) and (6) of Section 12 also contemplate assessment being made with regard to the returns to be furnished by owners and manufacturers. Any person aggrieved by an assessment has been given the right of appeal to the District Judge. But as pointed out before, there is no provision either in the statute or in the rules for a demand to be made and a coercive process to be employed in the event of failure to make the payment. That is done by Rule 33D alone from which it would be reasonable to conclude that under the rules it is only the manufacturers who are liable to pay the amount of duty. The rules can, therefore, be said to make a definite provision with regard to the category of persons from whom the collection of the duty is to be made, namely, the manufacturers. Appeal dismissed.

Issues Involved:
1. Legislative competence of Parliament to levy excise duty under Section 12 of the Rubber Act, 1947.
2. Excessive delegation of powers to the Rubber Board under Section 12(2).
3. Clarity and precision in the rules framed under Section 12(2) regarding the levy and collection of duty.

Issue-wise Detailed Analysis:

1. Legislative Competence of Parliament to Levy Excise Duty:
The primary contention was whether the duty imposed under Section 12 of the Rubber Act, 1947, as amended, falls within the ambit of Entry 84 of List I in the Seventh Schedule to the Constitution. The appellant argued that excise duty could only be levied on producers and manufacturers of rubber, not on users or consumers.

The court examined the nature of excise duty and concluded that while the duty is primarily on production or manufacture, the method of collection can vary. The court cited previous judgments to affirm that excise duty's essence remains unchanged irrespective of the collection stage. The court also noted that Parliament has legislative competence under Entry 97 of List I in the Seventh Schedule, read with Article 248 of the Constitution, to impose such a duty.

2. Excessive Delegation of Powers to the Rubber Board:
The appellant argued that Section 12(2) of the Act suffers from excessive delegation, conferring uncontrolled discretion on the Rubber Board to levy and collect duty from either the owners of rubber estates or the manufacturers without clear guidelines.

The court held that the legislative policy and guiding principles were sufficiently clear in the Act. The Board, a high-powered body with diverse representation, is entrusted to levy and collect the duty in accordance with rules framed by the Central Government. The court emphasized that the Act's preamble and provisions ensure that the Board's actions are subject to Central Government control, providing adequate safeguards against arbitrary exercise of power.

3. Clarity and Precision in the Rules:
The appellant contended that the rules framed under Section 12(2) lacked clarity and precision regarding whom the levy is to be made and from whom the duty is to be collected.

The court acknowledged that the rules, particularly Rule 33D, were not well-worded and lacked clarity. However, it interpreted the rules to mean that demand notices for duty payment are to be sent only to manufacturers, not to owners of rubber estates. This interpretation aligns with the practical difficulties in collecting duty from numerous small estate owners and the easier administration of collecting from a smaller number of manufacturers.

Conclusion:
The court dismissed the appeal, holding that:
1. Parliament has the legislative competence to levy the excise duty under Section 12 of the Rubber Act, 1947.
2. Section 12(2) does not suffer from excessive delegation as the Act provides sufficient legislative policy and guidelines.
3. The rules, though not clearly worded, effectively designate manufacturers as the primary category from whom the duty is to be collected.

The appeal was dismissed with costs, affirming the validity and legality of the levy of cess by way of excise duty on rubber used by manufacturers of chappals.

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