A COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS
v.
MIS. VENUS CASTINGS (P) LTD. ETC. ETC.
-
APRIL 5, 2000
B [S. RAJENDRA BABU AND S.N. PHUKAN, JJ.]
Central Excise Act 1944-Section 3A(4 ), Central Excise Rules-Rules
96W( 3) and 96ZP-Manufacturers having opted to pay excise duty under the
provisions of Rule 96W(3) of the Central Excise Rules claimed benefit of
c abatement accruing under Section 3A(4) of the Act-Held: There are two
alternative procedures for payment of duty which do not clash with each
other-Under Section 3(4) of the Act, the annual production capacity is
determined by the Commissioner of Central Excise in terms of the Rules and
duty fvced accordingly-Under Rule 96ZO manufacturers are classified on the
basis of furnace capacity and duty is relatable to this-Having opted for
D procedure under Rule 96W( 1), a manufacturer may opt out of procedure
under Rule 96ZO( 3) for a subsequent period and ask for assessment based on
annual production-Those who ha~e opted for payment under Rule 96W( 3)
cannot claim benefit of abatement since the said Rule Specifically excludes
application of Section 3A(4)-When an assessee opts for payment under Rule
E 96W(3), no annual assessment is done and so duty cannot be determined on
that basis, he cannot then claim to pay on actual production basis under
Section 3A(4) of the Act, seeking to adopt both of the alternative provisions--
Rule 96W( 3) is not Ultra Vires.
F Constitution of India-Article 136-Court will entertain SLP when there
is difference of opinion between High Courts/between two Benches of the same
High Court, or when there is uncertainty in the law.
The respondent assessees had opted for payment of excise duty un·
der Rule 96Z0(3) of the Central Excise Rules but claimed benefit of
G abatement available under Section 3A(4) of the Central Excise Act. When
this was refused by the Revenue some of the respondents tiled Writ peti-
tions. This appeal is by the Revenue because both the Tribunal and the
High Court had allowed contention of the respondents.
H Allowing the appeals, this Court
988
C.C.E. v. VENUS CASTING (P) LTD. 989
HELD : 1. The schemes contained in Section 3A(4) of the Central A
Excise Act and Rule 96Z0(3) or Rule 96ZP(3) of the Excise Rules are two
alternative procedures to be adopted at the option or the assessee. Thus
the two procedures do not clash with each other. H the assessee opts for
procedure under Rule 96ZO(l) he may opt or the procedure under Rule
96Z0(3) for a subsequent period and seek determination of annual capac-
B
ity production. An assessee cannot have a hybrid procedure of combining
the procedure under Rule 96ZO(l) to which Section 3A(4) of the Act is
attracted. The claim by the respondents is a hybrid procedure of taking
advantage of the payment of lumpsum on the basis of total furnace capac-
ity and not on-the basis of actual capacity of production. Such a procedure
cannot be adopted at all, for the two procedures are alternate schemes of c
payment of tax. Therefore, it is made clear that the manufacturers, if they
have availed of the procedure under Rule 96Z0(3) at their option, cannot
claim the benefit of determination of production capacity under Section
3A(4) of the Act which is specifically excluded. [994-E-G; 995-EJ
Sathavahana Stee{s & Alloys (P) Ltd. v. Government of India, (1999)
D
114 ELT 787; Mis. Jalan Castings (P) Ltd. v. Commissioner of Central
Excise & Ors., WritPetitionNo.1127of1999,disposedofonFebruary 28,
2000 by Allahabad High Court, approved.
Pravesh Castings (P) Ltd., Kanpur Nagar v. Commissioner of Central E
Excise, Allahabad & Am:, (2000) 36 RLT 239, Overruled.
State of Kerala'& Am: v. Builders Association of India & Ors., [1997]
2 sec 183, referred to.
2. It cannot be said that collection of tax based oil annual furnace F
capacity is not relatable to the production of goods and does not carry the
purpose of the Act. In holding whether a relevant rule to be Ultra Vires it
becomes necessary to take into consideration the purpose of the enactment
as a whole, starting from the preamble to the last provision thereto. H the
entire enactment is read as a whole indicates the purpose and that purpose G
is carried out by the rules, the same cannot be stated to be Ultra Vires of
the provisions of the enactment. [995-D-EJ
3. When different Benches of the same High Court have taken dif-
ferent views and another High Court has taken a view contrary to what
has been stated by the Tribunal and when there is uncertainty as to the H
990 SUPREME COURT REPORTS [2000] 2 S.C.R.
A state of law, it is eminently proper for the Court to grant leave in such a
matter and settle the legal position. [992-F-G]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4998 of 1999
Etc. Etc.
B From the Judgment and Order dated 13.5.99 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. No. BISI
423199-NB in E/792199 NB(DB).
Soli J. Sorabjee, Attorney General, Harish N. Salve, Solicitor General,
C.S. Vaidyanathan, Additional Solicitor General, Ms. Sunita Inna, P.
c Parmeswaran, Jaideep Gupta, Ms. Nisha Bagchi, R. Santhanam, Rajendra
Singhvi, Ashok K. Singh, A. Subba Rao, K. Swamy, C.N. Sree Kumar, Ms.
Shipra Ghose, P.C. Jain, Sandeep Jain, R. Krishnan, Manmohan and Dhirendra
Negi for the appearing parties.
D· The Judgment of the Court was delivered by
RAJENDRA BABU, J. These appeals are filed under Section 35-L(b)
of the Central Excise Act, 1944 (hereinafter referred to as 'the Act']. The
background facts leading to these appeals are that the manufacturer, who is a
respondent herein, having availed of the procedure for payment of duty under
E the Act in.terms of Rule 96Z0(3) of the Central Excise Rules cannot claim
the benefit of Section 3A(4) for determination of actual production and re-
determination of amount of duty payable by him with reference to the actual . .('
production at the rates as specified in the said Section. Earlier on several
occasions when the matter reached the Tribunal the view taken is that the
F Collector (Appeals) had to follow the orders made by the Tribunal and the
order made by the Collector is not in accordance with law inasmuch as no duty
is payable by the manufacturer otherwise than on actual production and
clearance and no demand of duty could be made or rec~vered on the basis of
production capacity alone without verification. In case of Mis Minakshi
Castings (P) Ltd., one of the respondents before us, it is held that the right
G vested in the assessee under Section 3A(4) cannot be denied on the ground
that he had opted for payment of duty under Rule 96Z0(3). The matter is
remanded to the Commissioner for determination of the actual production and
re-determination of duty liable to be paid with reference to the actual
production in accordance with the provisions of Section 3A(4). Hence these
H appeals.
- C.C.E. v. VENUS CASTING (P) LTD. [RAJENDRA BABU, J.] 991
In another batch of matters writ petitions have been filed before the
High Court of Delhi and certain orders have been obtained thereto at the
interim stage which are subject matter of another appeal before us and in
A
those circumstances the Delhi High Court had ordered that "it will be open
to the manufacturers to submit applications on the basis of actual production
and, if any such application is submitted, the same shall be duly considered
B
by the competent authority in accordance with the Rules."
Now we are informed at the bar that the very questions arising in the
cases before us stand referred to a Larger Bench by the Tribunal for deciding
(i) whether there is any conflict between the provisions of sub-section (4) of
Section 3A of the Act and sub- rule (3) of Rule 96ZO of the Central Excise C
Rules?, and (ii) whether a manufacturer who has exercised the option to make
payment of amount based on total furnace capacity installed in his factory
under sub-rule (3) of Rule 96ZO and not on the basis of annual capacity of
production can make an application for determining the actual production
during the period his aforesaid option is in operation?
D
An objection has been raised that these appeals do not involve determi-
nation of any question having a relation to the rate of duty of excise or to the
value of the goods for purpose of assessment and, therefore, even if at all
aggrieved by the order of the Tribunal ought to have followed the procedure
in Section 35- L(a) of obtaining a reference to the High Court and on its
E
decision to approach this Court under certificate. The learned Attorney
General without entering into the controversy as to whether an appeal in this
case is maintainable or not made it clear that he would seek conversion of
these appeals into petitions for grant of special leave under Article 136 of the
Constitution of India. Appropriate applications in this regard have also been
made. F
When the wind out the sails set in by the respondents has been taken
off by the fair stand of the learned Attorney General, the learned counsel for
the respondents addressed arguments' that these are not fit cases where this
Court should exercise its discretion under Article 136 to grant leave and
entertain these appeals.
G
It is no doubt true that a Larger Bench of the Tribunal itself is now
seized of the very question raised in these appeals. However, the learned
Attorney General pointed out that there are at least two decisions of the
Andhra Pradesh High Court and Allahabad High Court on this issue. In H
992 SUPREME COURT REPORTS [2000] 2 S.C.R.
A Sathavahana Steels & Alloys (P) Ltd. v. Government of India, (1999) (114)
ELT 787, the Andhra Pradesh High Court has taken the view that Rule
96Z0(3) of the Excise Rules has been framed for the facility of assessee and
being at the volition and option o_f the assessee to avail of the said procedure
-
instead of the procedure under sub- rules (1) and (2) thereof and once such
option is availed of he takes advantages and disadvantages associated with it.
B
An assessee who comes under the purview of sub-rule (3) of the scheme
cannot obviously avail of the reliefs provided to the assessee who preferred
to pay duty in accordance with sub-rule (1) thereof. The High Court further
stated that it is not probable that the assessee will not be aware of the adverse
factors which affect production. He cannot, therefore, claim that provisions for
c abatement of duty and re-determination of the capacity as contained in the
proviso to sub- sections (3) and (4) of Section 3A should be imported to Rule
96Z0(3). When once the assessee opts for lumpsum payment under Rule
96Z0(3) he forgoes the benefit under the proviso to sub~sections (3) and (4)
of Section 3A as laid down in express and categorical terms by sub-rule (3)
of Rule 96ZO of the Excise Rules. The Allahabad High Court in Pravesh
D
Castings (P) /.Jd, Kanpur Nagarv. Commissioner of Central Excise, Allahabad
& Am:, (2000) 36 RLT·1239, directed the Commissioner to re-deterrillne the
production capacity afresh and to follow the orders of the Trib~al. There is
no discussion as to the scope of the relevant rules or the provisions of the
enactment. Again another Bench of the Allahabad High Court considered this
E question in Civil Miscellaneous Writ Petition No. 1127 of 1999 Mis Jalan
Castings (P) Ltd. v. Commissioner of Central Excise & Ors., wherein the view
taken is that when a manufacturer has asked for a lumpsum method of
assessment as provided under Rule 96Z0(3) of the Excise Rules, the manu-
facturer cannot back out and claim that he should be assessed in the normal
F mode under Section 3A(4) of the Act and such a course is not available to him.
In these circumstances, when different Benches of the same High Court have
taken different views and another High Court has taken a view contrary to
what has been stated by the Tribunal and when there is uncertainty as to the
state oflaw, it is eminently proper for this ~ourt to grant leave in such a matter
and settle the legal position. We thought over the matter as to whether we
G should ourselves consider the questions raised before us or set aside the order
impugned before us and remand the matter to the Tribunal for a fresh
consideration. We are of the view that when there is uncertainty in law so far
as the High Courts are concerned, it is not at all proper to allow the Tribunal
to re- examine the matters as it would not be in the interest of either the
H assessee or the Department. In this special background, we do not think we
C.C.E. v. VENUS CASTING (P) LTD. [RAJENDRA BABU, J.] 993
can accede to the objection raised on behalf of the respondents that we should A
not entertain the special leave petitions and reject these matters. On the other
hand, we would grant leave and proceed to deal with these appeals.
In these proceedings the validity of the provisions of the Rules is not
in challenge but only their interpretation and application have to be examined.
B
Section 3A of the Act enables the Central Government to charge excise
duty on the basis of capacity of production in respect of notified goods. This
clause came to be inserted in the Act by the Finance Act, 1997. The intention
to introduce this provision appears to be that in certain sectors, like induction
furnaces, steel re-rolled mills, etc. evasion of excise duty on goods· is
substantial and the production is not disclosed accurately and collection of
c
excise duty on the basis of their production capacity is thought of as
appropriate. Under the scheme evolved in this provision the annual production
capacity of mills and furnaces is determined by the Commissioner of Central
Excise in terms of the Rules to be framed under Section 3A(2) of the Act by
the Central Government. Thereafter, the assessee would be liable to pay duty D
based on such determination. If the annual production capacity determined by
the Commissioner is disputed by the assessee, the Commissioner is required
to re-determine the same as provided in Section 3A(4).
I
Rules 96ZO and 96ZP provide for procedure to be followed by the
manufacturer of ingots and billets and hot re-rolled products respectively. The E
scheme envisaged under these provisions is identical. These two Rules come
into play after the Commissioner of Central Excise determines the annual
capacity of the factory or mills manufacturing ingots or billets and hot re-
rolled steel products under Section 3-A of the Act read with the relevant
annual capacity determination rules. Rules 96ZO and 96ZP proceed to lay F
down the manner of payment of duty, claim for abatement non-payment,
payment of interest/penalty and such other incidental matters. Rule 96ZO
classifies the manufacturers into two classes, those whose furnace capacity is
.... 3 tonnes and other manufacturers with high capacity of furnaces. The rate of
duty payable, except for period from 1.1.1997 to 31.3.1998 which was the
transitional period, is Rs. 750 per tonne, at the time of clearance. Total amount
G
of duty should be paid by the 31st March of relevant financial year, otherwise
interest at the rate of 18 per cent per annum is payable and if the duty has not
been paid by this date penalty is also payable which is equal to outstanding
duty or Rs. Five thousand whichever is greater. Sub-rule (2) thereof provides
H
994 SUPREME COURT REPORTS [2000] 2 S.C.R.
A that if no ingots and billets are produced for a continuous period of seven days,
the manufacturer may claim abatement by following appropriate procedure.
Sub-Rule 3 thereof envisages a composition method of payment of duty.
Manufacturers of ingots and billets with furnace capacity of 3 tonnes have an
option of paying duty of Rs. Five lakhs per month in two equal instalments
B prior to 15th of a month and by last date of that month. Such payment is treated
to be in full discharge of duty liability. The Rule specifically excludes
application of Section 3A(4). But manufacturers opting for this composite
scheme cannot claim abatement. If the furnace capacity is less than or more
than 3 tonnes payment of Rs. 5 lakhs can be varied on pro-rata basis. The
manufacturer opting for this composite scheme has to give a declaration to the
c Jurisdictional Assistant Commissioner as provided under the Rules. There are
similar provisions in relation to hot re-rolled products. By reason of the
assessee having exercised his desire of paying duty based on total furnace
capacity the determination of annual capacity of production is not determined
by the Revenue as the procedure adopted obviates determination of produc-
D tion. In the absence of determination of production the question of its
determination on the basis of actual production as detailed in Section 3A(4)
of the Act does not arise.
The schemes contained in Section 3A(4) of the Act and Rule 96Z0(3)
or Rule 96ZP(3) of the Excise Rules are two alternative procedures to be
E adopted at the option of the assessee. Thus the two procedures do not clash
with each other. If the assessee opts for procedure under Rule 96ZO(l) he may
opt out of the procedure under Rule 96Z0(3) for a subsequent period and seek
the determination of annual capacity of production. An assessee cannot have
a hybrid procedure of combining the procedure under Rule 96ZO(l) to which
F Section 3A(4) of the Act is attracted. The claim by the respondents is a hybrid
procedure of taking advantage of the payment of lumpsum on the basis of total
furnace capacity and not on the basis of actual capacity of production. Such
a procedure cannot be adopted at all, for the two procedures are alternative
schemes of payment of tax.
G The learned counsel for the respondent contended that the Rule 96Z0(3)
is contrary to Section 3A(4) of the Act and, therefore, should be held to be
ultra vires or read the relevant rules in such a manner as to allow the procedure
prescribed under the provisions of Section 3A(4) to be followed. Section 3A
of the Act provides for levy and collection of the tax arising under the Act
H in such manner and at such rate as may be prescribed by the Rules. Section
C.C.E. v. VENUS CASTING (P) LTD. [RAJENDRA BABU, J.] 995
3A provides special procedure in respect of the power of the Central A
Government to charge excise duty on the basis of capacity of production in
respect of notified goods. If such interpretation is not accepted, it is contended.
that the levy of tax is in the nature of a licence fee and not on production of
goods at all. Schemes of composition are available in several other enactments
including the Sales Tax Act and the Entertainment Tax [ See : State of Kerala B
& Am: v. Builders Association of India & Ors., [1997] 2 SCC 183. In this
context, the learned counsel for the respondents referred to several decisions.
However, in our opinion, all these decisions either arising under the Income
Tax Act in relation to special mode of collection of tax or excise duty on
timber dealers or other enactments have no relevance. What can be seen is that
the charge under the Section is clearly on production of the goods but the c
measure of tax is dependent on either actual production of goods or on some
other basis. The incidence of tax is, therefore, on the production of goods. It
cannot be said that collection of tax based on the annual furnace capacity is
not relatable to the production of goods and does not carry the purpose of the
Act. In holding whether a relevant rule to be ultra vires it becomes necessary D
to take into consideration the pmpose of the enactment as a whole, starting
from the preamble to the last provision thereto. If the entire enactment is read
as a whole indicates the purpose and that purpose is carried out by the rules,
the same cannot be stated to be ultra vires of the provisions of the enactment.
Therefore, it is made clear that the manufacturers, if they have availed of the E
procedure under Rule 96Z0(3) at their option, cannot claim the benefit of
detennination of production capacity under Section 3A(4) of the Act which
is specifically excluded. We find that the view taken by the Andhra Pradesh
High Court in Sathavahana Steels & Alloys (P) Ltd. v. Government of India
(supra) and the similar view expressed by the Division Bench of the Allahabad
High Court in Civil Miscellaneous Writ Petition No. 1127 of 1999 Mis Jalan F
Castings ( P) Ltd. v. CommissiOner of Central Excise & Ors. disposed of on
February 28, 2000 is reasonable and correct. We overrule the view taken by
the Allahabad High Court in Pravesh Castings (P) Ltd., Kanpur Nagar v.
Commissioner of Central Excise, Allahabad & Anr. (supra).
G
On the reasoning adopted by us and bearing in mind that in taxation
measures composition schemes are not unknown and when such scheme is
availed of by the assessee it is not at all permissible for him to tum around
and ask for regular assessment, we think, there is no substance in the
contention urged on behalf of the respondents. H
996 SUPREME COURT REPORTS [2000] 2 S.C.R.
A There are a few peripheral submissions made on behalf of the respond-
ents that in several cases the Commissioners have wrongly fixed the furnace
capacity and that aspect has to be examined by the Tribunal in such cases. In
these cases, therefore, we set aside the orders made by the Tribunal and direct
the Tribunal to bring the orders in conformity with the view expressed by us
and pass appropriate orders.
B
.We allow these appeals accordingly. However, in the circuj:nstances of
the case there shall be no orders as to costs. I /
l.M.A. Appeals allowed.