2000 (9) TMI 76 - HC - Central Excise

Issues Involved:

1. Validity of Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination (Amendment) Rules, 1997.
2. Whether Rule 5 is ultra vires and contrary to Section 3A of the Central Excise Act, 1944.
3. The impact of interim orders and stay granted by the Court.
4. The applicability of the Supreme Court's stay order on similar notifications.
5. Relevance of the Andhra Pradesh High Court decision and Supreme Court's principles on economic reform legislation.

Issue-wise Detailed Analysis:

1. Validity of Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination (Amendment) Rules, 1997:

The petitioners, including the Madras Steel Re-rollers Association and individual companies, sought a declaration that Rule 5, inserted by Notification No. 45/97-Central Excise (NT), dated 30-8-1997, is ultra vires and contrary to Section 3A of the Central Excise Act, 1944. Rule 5 states, "In case the Annual capacity determined by the formula in Sub-Rule (5) of Rule 3 in respect of a Mill, is less than the actual production of the Mill during the financial year 1996-97, then the annual capacity so determined shall be deemed to be equal to the actual production of the Mill during the financial year 1996-1997."

2. Whether Rule 5 is ultra vires and contrary to Section 3A of the Central Excise Act, 1944:

The petitioners argued that Rule 5 contradicts Section 3A of the Act, which prescribes the levy of excise duty based on the annual capacity of production. They contended that Rule 5 prescribes excise duty based on actual production during 1996-97, which is contrary to the Act. They further argued that Rule 5 failed to consider relevant factors such as power cuts, shortage of raw materials, labor unrest, and market recession, thus defeating the basic concept of the formula prescribed under Section 3A.

3. The impact of interim orders and stay granted by the Court:

The Court had initially granted interim injunctions and stays as claimed by the petitioners. However, the respondents filed applications for vacation of these interim orders. The Court noted that it was not necessary to delve into the validity of Rule 5 at this stage but acknowledged the rival contentions for ascertaining a prima facie case.

4. The applicability of the Supreme Court's stay order on similar notifications:

The respondents pointed out that the Supreme Court had stayed the Delhi High Court's order, which had granted a stay on similar notifications, including Notification No. 45/97. The Supreme Court's stay order indicated that the petitioners were liable to pay the levy as per the law in force. The Court referred to the Supreme Court's decision in Bhavesh D. Parish v. Union of India, which emphasized judicial restraint in staying the applicability of economic reform legislation unless manifestly unjust or glaringly unconstitutional.

5. Relevance of the Andhra Pradesh High Court decision and Supreme Court's principles on economic reform legislation:

The respondents cited the Andhra Pradesh High Court's decision in Sarwotham Ispat Ltd. v. Government of India, which dismissed similar writ petitions pertaining to steel-making units. The Court found support in this decision and noted that Rule 5 was introduced to prevent duty evasion, aligning with the objective of Section 3A. The Court also highlighted the Supreme Court's caution against intervening at the interlocutory stage in matters of economic reforms and fiscal statutes.

Conclusion:

The Court vacated the interim injunction and stay granted in all the writ petitions, dismissing the related applications. The Court held that the writ petitioners were liable to pay the levy as per the law in force, emphasizing the presumption of constitutional validity of legislation unless set aside after final hearing. The decision was influenced by the Supreme Court's stay on similar notifications and the principles laid down in Bhavesh D. Parish v. Union of India.

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