K.P.Steels Limited, Secunderabad, V. The Commissioner of Customs and Central Exise,

WP/917/1999

AI Insights

The case involves multiple steel manufacturing companies challenging the constitutionality of Rule 5 of the Hot Re-Rolling Mills Annual Capacity Determination Rules, 1997, under Article 226 of the Constitution of India. The petitioners argued that the rule was ultra vires to Section 34 of the Central Excise and Salt Act, 1944, and unconstitutional as it violated Article 14. The respondents included various commissioners and superintendents of Central Excise, and the Union of India represented by the Department of Revenue. The High Court's decision referenced the Supreme Court's ruling in Venus Castings (P) Limited, which upheld the rule's validity.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 744271 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 23-12-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Central Excise & Customs v. Venus Castings (P) Limited, Sathoutohana Steels & Alloys (P) Ltd. v. Government of India, M/s Jalan Castings (P) Ltd v. Commissioner of Central Excise & Ors., Prajesh Castings (P) Ltd. Kanpur Nagar v. Commissioner of Central Excise, Allahnbad & Anr.
• Laws Referred To: Central Excise and Salt Act, 1944, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B REDDY; GADI KUMAR
• Assessee Lawyers: NARAYAN TOSHNIWAL
• Keywords: Arbitrary; Ultra Vires; Unconstitutional; Violate of Article 14; Hot Re-Rolling Mills Annual Capacity Determination Rules 1997
• Section: 34; 3A

Judgement Text

"[ 32es ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) FRIDAY ,THE TWENTY THIRD DAY OF DECEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY WRIT PETITION NO: 917 OF 1999 Between: 1. K.P.Steels Limited, Secunderabad, rep. by Managing Director. 2. Andhra lspat Limited, 228, Chandralok Complex,S.D. Road, Secunderabad. 3. Gautami Re-Rolling Mills Pvt., Ltd.,lDA, Moulali, Hyderabad. 4. Mahaveer Steel Re-Rolling Mills, lDA, Azamabad, Hyderabad. 5. P.K.Steel Re-Rolling Mills, Kottur, Mahaboobnagar District. AND 1. The Commissioner of Customs and Central Exise, Hyderabad-1 , Commissionerate, Hyderabad. 2. The Commissioner of Customs and Central Exise, Hyderabad-2, Commissionerate, Hyderabad. 3. The Commissioner of Customs and Central Exise, Hyderabad-3, Commissionerate, Hyderabad. 4. The Asst., Commissioner of Central Excise, Division 8, Tilak Road, Hyderabad. 5. The Asst., Commissioner of Central Excise, Division 10, Tilak Road, Hydearabad. 6. The Asst., Commissioner of Central Excise, Division 2, Nampally STN Road, Hyderabad. 7. The Asst., Commissioner of Central Excise, Division 5, Tilak Road, Hyderabad. 8. The Superindentent of Central Excise, Tupuran Range, Hyderabad. 9. The Superindentent of Central Excise, Bibinagar Range, Hyderabad. 10.The Superindentent of Central Excise, Moulali Range, Hyderabad. 11.The Superindentent of Central Excise, Azamabad Range, Hyderabad. ...PETITIONERS 12.The Superindentent of Central Excise, Kothur Range ll, Kothur, Mahaboobnagar District. '13.The Union of lndia, Represented by its Secretary to Government,Department of Revenue, Ministry of Finance, North Block, New Delhi. 1 4. The Central Board of Excise and Customs, North Block, New Delhi. ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, direction or order especially in nature of mandamus declaring the provision of rule 5 of the Hot Re-Rolling [ /ills Annual Capacity Determination Rules 1997 as ultra vires the provisions of Section 34 of the Central Exise and Salt Act, 1994, and also as u nconstitutional, arbitrary and violate of Article 14 of the Constitution of lndia. l.A. NO: 1 OF 19S9(WPMP. NO: 1051 OF 1999) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased praying to suspend the provisions of Rule 5 of the Hot Re-Rolling Mills Annual Capacity Determination Rules 1 997 l.A. NO: 2 OF 1999(WVMP. NO: 1967 OF 1999 Between: 1. The Commissioner of Customs and Central Exise, Hyderabad-1 , Commissionerate, Hyderabad. 2. The Commissioner of Customs and Central Exise, Hyderabad-2, Commissionerate, Hyderabad - 3. The Commissioner of Customs and Central Exise, Hyderabad-3, Commissionerate, Hyderabad. 4. The Asst., Commissioner of Central Excise, Division B, Tilak Road, Hyderabad. 5. The Asst., Commissioner of Central Excise, Division 10, Tilak Road, Hydearabad. 6. The Asst., Commissioner of Central Excise, Division 2, Nampally STN Road, Hyderabad. 7. The Asst., Commissioner of Central Excise, Division 5, Tilak Road, Hyderabad. B. The Superindentent of Central Excise, Tupuran Range, Hyderabad. 9. The Superindentent of Central Excise, Bibinagar Range, Hyderabad. 10. The Superindentent of Central Excise, Moulali Range, Hyderabad. 1 \"l . The Superindentent of Central Excise, Azamabad Range, Hyderabad. I I 1 2. The Superindentent of Central Excise, Kothur Range ll, Kothur, Mahaboobnagar District. 13.The Union of lndia, Represented by its Secretary to Government,Department of Revenue, Ministry of Finance, North Block, New Delhi. 14.The Central Board of Excise and Customs, North Block, New Delhi AND 1. 2. J. 4. 5. ...PETITIONERS/RESPONDENTS Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to vacate the lnterim direction passed in W.P.M.P.No.1356/99 dated 05.02.1999 and WP No.917 dismiss the writ petition with costs Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased is prayed that the order of this Hon'ble Court dated Bth September, 1999 inW.V.M.P.No.1967/99 connected with W.P.M.P.No.1051 of 1999 may be modified, and that part of the direction with respect the payment of half the arrears of duty may be deffered by a period of '12 weeks. Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to fix an early date for hearing of the above writ petition Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to modify earlier order dt.5-2-1999 by permiting the petitioner to pay excise duty for the assessment year 1998-99 in accordance with sec 3ACentral Excise Act without reference to Rule 5 of Hot Re-Rolling Mills Annual Capacity Determination Rules, 1 997. K.P.Steels Limited, Secunderabad, rep. by Managing Director. Andhra lspat Limited, 228, Chandralok Complex,S.D. Road, Secunderabad. Gautami Re-Rolling Mills Pvt., Ltd.,lDA, Moulali, Hyderabad. Mahaveer Steel Re-Rolling Mills, lDA, Azamabad, Hyd6rabad. P.K.Steel Re-Rolling Mills, Kottur, Mahaboobnagar District. ...RESPONDENTS/PETITIONERS l.A. NO:3 OF 1999(WPMP. NO:26811 OF 1999) l.A. NO: 1 OF 2001(WPMP. NO: 7624 OF 2001) l.A. NO: 2 OF 2001(WPMP. NO: 7625 OF 2001) l.A. NO: 1 OF 2012(WPMP. NO: 25390 OF 2012 Between: 1. ) 2 3 4 5 6 7 The Commissioner of Customs and Central Exise, Hyderabad-l , Co mm issio n erate, Hyderabad. The Commissioner of Customs and Central Exise, Hyderabad-2, Commissionerate, Hyderabad. The Commissioner of Customs and Central Exise, Hyderabad-3, Commissionerate, Hyderabad. The Asst., Commissioner of Central Excise, Division 8, Tilak Road, Hyderabad. The Asst., Commissioner of Central Excise, Division 10, Tilak Road, Hydearabad. The Asst., Commissioner of Central Excise, Division 2, Nampally STN Road, Hyderabad. The Asst., Commissioner of Central Excise, Division 5, Tilak Road, Hyderabad. The Superindentent of Central Excise, Tupuran Range, Hyderabad. The Superindentent of Central Excise, Bibinagar Range, Hyderabad. 10.The Superindentent of Central Excise, Moulali Range, Hyderabad. 1 1 . The Superindentent of Central Excise, Azamabad Range, Hyderabad. 12.The Superindentent of Central Excise, Kothur Range ll, Kothur, Mahaboobnagar District. 13. The Union of lndia, Represented by its Secretary to Government, Department of Revenue, Ministry of Finance, North Block, New Delhi. 14.The Central Board of Excise and Customs, North Block, New Delhi ...PETITIONERS/RESPONDENTS K.P.Steels Limited, Secunderabad, rep. by Managing Director. Andhra lspat Limited, 228, Chandralok Complex,S.D. Road, Secunderabad. Gautami Re-Rolling Mills Pvt., Ltd.,lDA, Moulali, Hyderabad. Mahaveer Steel Re-Rolling Mills, lDA, Azamabad, Hyderabad. P.K.Steel Re-Rolling Mills, Kottur, Mahaboobnagar District. B I AND 1 2 4 F ...RESPONDENTSAA/RIT PETITIONER Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to condone the delay of 42 days in re-submitting the case above WP.SR. No. 68462 of 2012 in the interest of justice. Counsel for the Petitioners: MR. NARAYAN TOSHNIVAL FOR S. VIVEK CHANDRA SEKHAR Counsel for the Respondents: SRI B.SAPNA REDDY (SR SC FOR CB EXCISE) Counsel forthe Respondent 13: SRI GADI PRAVEEN KUMAR, DY.SOL.GEN. OF INDIA The Court made the following: ORDER THE HON'BLE THE CHIEF JUSTICE UJJAL BHIryAN AND THE HON'BLE SRI JUSTICE C.V.BIIASKAR REDDY ORDER: Per the Hoi'bte the Chief Justbe Ujjal BL Uan) Heard Mr. Sri Narayan Toshnival, representing Mr. S.Vivek Chandra Sekhar, learned counsel for the petitioners. 2. By filing this petition under Article 226 of the following relief: For the reasons stated in the accompanying affidavit, it is prayed that this Hon'ble Court may be pleased to issue a writ, direction or order especially in the nature of mandamus declaring tlle provisions of Rule 5 of the Hot Re-rolling Mills Annual Capacity Determination Ru1es, 1997 as ultra uires the provisions of Section 3A of the Central Excise and SaIt Act, 1944, and also as unconstitutional, atbitrary and violative of Article 14 of the Constitution of India and pass such other order or orders as are deemed fit and proper in the circumstances of the case. WRIT PETITION No.9l7 of 1999 Constitution of India, petitioners have prayed for the I 2 whereafter counter affidavit has been filed bv the re spondents. 5. In Venus Castings (P) Limited (supra) it was held as follows: 8. 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 Pinance Act, 1997. The intention to introduce this provision appe€rrs to be that in certain sectors, tike 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 excise duty on the basis of their production capacity is thought of as appropriate. Under the scheme evolved in this provision the arnual production capacity of mills ald furnaces is ,-determined by the Commissioner of Centra-l Excise in terms of the Rules to be framed under Section 3A(2) of the Act by the Central Government. Thereafter, the ' 2ooo (1 17) ELT 273 (sc) 3. The case was admitted for hearing on O5.O2.1999 4 . It has been brought to the notice of this Court that the issue involved in the present writ petition is covered by the decision of the Supreme Court in Commissioner of Central Excise & Customs v. Venus Castings (Pl Limitedl. J assessee wouid be liable to pay duty based on such determination. If the annual production capacitlz determined by the Commissioner is disputed by the assessec, the Commissioner is required to re-determine the same as provided in Section 3A(4). 9. Rules 9620 atd 96ZP provide for procedure to be followed by the manufacturer of- ingots and billets and hot re-rolled products respectively. The scheme envisaged under these provisions is identical. These two Rules come into play a-fter the Commissioner of Centra-l Excise determines the annual capacity of the factory or mills manufacturing ingots or billets and hot re-rolied steel products under Section 3A of the Act read with the relevant annual capacity determination rules. Rules 96Z0 and 96ZP proceed to lay down tfre manner of payment of duty, claim for abatement non-paJ,.rnent, palrrnent of interest/ penalty and such other incidenta-l matters. RuIe 9620 classifres the manufacturers into two classes, those whose fumace capacrty is 3 tonnes and other manufacturers with high capacity of furnaces. The rate of duty payabie, except for period from 1-1- 1997 to 31-3-1998 which was the transitional period, is Rs. 75O/- per tonne, at the time of clearance. Total amount 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 that if no ingots and billets are produced for a continuous 'period of seven days, ttre manufacturer may claim abatement by following appropriate procedure. Sub-rule (3) thereof envisages a compositioo method of payment I I 4 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 prior to 15th of a month and by last date of that month. Such payment is treated to be in fu1l discharge of duty liability. The Rule specifrca-lly excludes application of Section 3A(4). But marrufacturers opting for this composite scheme cannot claim abatement. If the furnace capacity is less than or more than 3 tonnes paJment of Rs. 5 lakhs can be varied on pro rato basis. The manufacturer opting for t1lis composite scheme has to give a declaration to the Jurisdictional Assistant Commissioner as provided under the Rules. There are similar provisions in relation to hot re-rolled products. By reason of tJle 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 production. 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. 10. The schemes contained in Section 3A(4) ofthe Act and Rule 9620(31 or Rule 96ZP(3 of the Excise Rules are two alternative procedures to be adopted at the option of t1.e assessee. Thus the two procedures do not clash with each other. If the assessee opts for procedure under Rule 9620(ll he may opt out of the procedure under Rule 967A(31 for a subsequent period and seek the determination of artnual capacity of production. An assessee cannot have a hybrid procedure of combining the procedure under RuIe 9620{l) to which Section 3A(4) of the Act is attracted. The claim by the I respondcnts is a hybrid procedure of taking advantagq 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 a-lternative schemes of payment of tax. 11. The learned Counsel for the respondent contended t1.at the Rule 9620(3) is contrary to Section 3A(4) of the Act and, therefore, should be held to be ultro uires 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 34 of the Act provides for lery and collection of the tax arising under the Act in such manner and at such rate as may be prescribed by the Rules. Section 3A provides special procedure in respect of the power of t.l.e Central Government to chaJge excise dut;z on the basis of capaciqy of production in respect of notified goods. If such interpretation is not accepted, it is contended, that the leq' 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 t].e Entertainment Tax [See: State o/ Kerala & Anr. u. Builders Association of India & Ors., 1997 {21 SCC 1831. In this context, the leamed Counsel for the respondents referred to several decisions. However, in our opinion, all these decisions either arising under t1.e Income Tax Act in relation to special mode of collection of tax or excise dulr on timber dealers or other enactments have no relevance. What can be seen is that the charge under tJle Section is clearly on production of the goods but the measure of tax is depenclent on either actual production of goods or on 5 I 6 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 relevalt rule to Lre ultra uires it becomes necessa4/ to take into consideration the purpose of the enactment as a whole, starting from tJle 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 uires of the provisions of the enactment. Therefore, it is made clear that the manufacturers, if they have availed of the procedure under Rule 9620(3 at their option, cannot claim the benefrt of determination of production capacity under Section 3A(4) of the Act which is specifrcally excluded. We find that the view taken by the Andhra Pradesh high Court rn Sathoutohana Steels & Allogs (P) Ltd. u. Gouernment of India (1999 (114) ELT 787 (AP)) and the similar view expressed by the Division Bench of the Allahabad High Court in Civil Miscellaneous Writ Petition No. 1127 of 1999 M/ s: Jalan Co\"stings (P) Ltd u. Commi.ssioier of Central Excise & Ors. disposed of on February 2a, 2OOO is reasonabie ald correct. We overmle the view taken by the Allahabad High Court in Prauesh Co.stings (P) Ltd. Kanpur Nagar u. Commissioner of Central Excbe, Allahnbad & Anr. (2000 (117) ELT 294 (AlU). 12. 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 t1t.e assessee it is not at all permissibie for him to turn around and ask for regular assessment, we think, there I I 7 To, is no substance in the contention urged on behalf of the respondents. 6. In view thereof, the present writ petition is disposed of in the light of the above pronouncement. Miscellaneous applications pending, if any, shall stand closed. However, there shall be no order as to costs. SD/.B.CHANDRA PRAKASH //TRUE COPY// ASSISTANT#GISTRAR SECTION OFFICER 1. The Commissioner of Customs and Central Excise, Hyderabad-1 , Commissionerate, Hyderabad. 2. The Commissioner of Customs and Central Excise, Hyderabad-2, Commissionerate, Hyderabad. 3. The Commissioner of Customs and Central Exise, Hyderabad-3, Commissionerate, Hyderabad. 4. The Asst., Commissioner of Central Excise, Division 8, Tilak Road, Hyderabad. 5. The Asst., Commissioner of Central Excise, Division 10, Tilak Road, Hydearabad. 6. The Asst., Commissioner of Central Excise, Division 2, Nampally STN Road, Hyderabad. 7. The Asst., Commissioner of Central Excise, Division 5, Tilak Road, Hyderabad. 8. The Superindentent of Central Excise, Tupuran Range, Hyderabad. 9. The Superindentent of Central Excise, Bibinagar Range, Hyderabad. 10. The Superindentent of Central Excise, Moulali Range, Hyderabad. 't 1 . The Superindentent of Central Excise, Azamabad Range, Hyderabad. '12. The Superindentent of Central Excise, Kothur Range ll, Kothur, Mahaboobnagar District. 3.The Union of lndia, Department of Revenue, Ministry of Finance, North Block, New Delhi. 4.The Central Board of Excise and Customs, North Block, New Delhi. 5. One CC to SRI S VIVEK CHANDRA SEKHAR, Advocate [OPUC] 6. One CC to SRI B. SAPNA REDDY (SR SC FOR CB EXCISE) [OPUC] 7.One CC to DY. SOLICITOR GENERAL OF INDIA IOPUC] B.Two CD Copies 1 1 1 1 I 1 EDS crL>^l& ,/ I I HIGH COURT DATED:2311212022 ORDER HE STA 15, 1 ( .( -) o o [ 4 FiB 2[23 z c:t .1, WP.No.917 of 1999 DISPOSING OF THE WRIT PETITION WITHOUT COSTS L * OE I .ri .i, "