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TMI Blog2001 (12) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... f capacity of production in respect of notified goods. Under the said provision, notwithstanding anything contained in Section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of Section 3A of the Act. From the above said provision, it is clear that with respect to the notified goods, the Central Government can levy and collect excise duty on the basis of capacity of production. 3.Under Section 3A(2) of the Act, the Central Government is empowered to frame rules by issuing notification providing the manner for determination of the annual capacity of production of the factory and such annual capacity shall be deemed to be the annual production of such goods by such factory. The Central Government also is empowered to specify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total quantity of processed fabrics referred to in Rule 2, produced or manufactured in the preceding financial year; to the Commissioner of Central Excise (hereinafter referred to as the Commissioner), with a copy to the Assistant Commissioner of Central Excise. ……. the annual capacity of production of processed textile fabrics specified in Rule 2 in respect of a factory of an independent processor shall be determined keeping in view the following factors, namely :- (i) the number of chambers (of a hot-air stenter), each of which having a rail length of up to 3.05 metre on each side, installed in such factory shall be constructed as one chamber and any fraction exceeding such rail length of any such chamber shall be computed on a pro rata basis; (ii) …… (iii) for the textile fabrics produced by the new units or the closed units of such factory for which it is not possible to calculate average value under sub-clause (ii), the average value of such fabrics shall be as declared by the independent processor at the time of making the declaration, provided that the amount of duty payable on such fabrics shall be reworked out at the end of a financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 3A(1) of the Act and so it is ultra vires the said provision and also Articles 14, 19(1)(g) and 265 of the Constitution of India. According to him, the annual capacity of production of processed textile fabrics is sought to be determined on the basis of number of chambers fixed and the average value of production per chamber per month, without determining the capacity of production of factory, which cannot be sustained. He relied on number of decisions in support of his submission. 7.The learned Additional Solicitor General while defending the validity of the said rules has submitted that the method contemplated under the rules had been followed uniformly and so the petitioners cannot have any grievance. According to him, the annual capacity of production was taken into consideration not only on the basis of number of chambers, but also the average value of production. He has also submitted that in the matter relating to economic measures, the Court adjudged the constitutionality of the legislation by its own equalities or only by possibilities of abuse of any of its provision. According to the learned Addl. Solicitor General, the petitioner cannot rely on the other r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sq.m., and Rs. 15.63 lakhs in the case of fabrics of average value of exceeding Rs. 30/- per sq.m. without any basis the Central Government have fixed the said amount. At the same time, while contemplating the rate of excise duty under Notification No. 36/98 it is fixed as 1.5 lakhs per chamber per month in the case of a processing factory whose average value of fabrics is up to and including Rs. 30/- per sq.m. and Rs. 2 lakhs in the case of processing factory whose average value of fabrics is exceeding Rs. 30 per sq.m. 10.From the above, it is clear that the Central Government have not framed a workable formula to fix the annual capacity of production of the processed textile fabrics and they have fixed the amount, which also has not been explained before this Court as to how the said amount had been arrived at towards the average value of production per chamber per month. The production capacity cannot be on the basis of number of chambers alone or on the basis of the rail length alone. As rightly submitted by learned Senior Counsel, it depends upon various factors. According to the Act, the annual capacity of production of the processed textile fabrics has to be arrived a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and the rules made thereunder as well as all recognized principles of valuation for the purpose of taxation. If levy of tax in a municipal district based on floor area in respect of a factory building violates Article 14 of the Constitution when the tax is sought to be levied by the Municipal Corporation, we see no reasons to uphold the tax imposed under the impugned Act when the State in exercise of legislative authority conferred by Entry 49, List II Sch. : VII, imposes liability to the buildings solely on floor area. The vice of the Act in the present case is more pronounced than it was in New Manek Chowk Spinning and Weaving Mills case (1967) 2 SCR 679 = (AIR 1967 SC 1801); in that case the Rules under which the tax was sought to be levied on the basis of floor area were restricted in their operation to factory buildings within the Corporation limits of Ahmedabad, whereas Act 19 of 1961 which is challenged in the present case applies to the whole State of Kerala in respect of buildings completed on or after March 2, 1961, whatever may be the nature or class of materials used in its construction and the extent of profitable user to which the building may be put, its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners has to be accepted under the impugned notifications, the Government have not tried to fix the formula to determine the production capacity on the basis of the quantity of production, but on the basis of the value fixed by the Central Government by themselves irrespective of the capacity of the factories concerned. Such a flat rate fixed by the Central Government cannot be sustained in view of the above-mentioned decisions of the Apex Court. Further, from a reading of Notification Nos. 36/1998 and 42/1998. I am not able to see any link between such notification though one is for fixing determination of production capacity and another is giving the rate of duty of excise which has to be levied and collected on the basis of the said determination of the production capacity following the rules framed under Notification No. 42/1998. Any rules, should be only in accordance with the main provisions and to achieve the object of the said provisions. So, the capacity of production cannot be arrived at on the basis of deemed value as it has been given by the Central Government that too without any basis. 13.As rightly submitted by learned Counsel all chambers irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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