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Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition

NA

Attorney(S)
  • H.N Salve, Solicitor-General and D.A Dave, A.K Ganguli, M.L Verma, Joseph Vellapally, Senior Advocates (A. Subba Rao, Ms Nisha Bagchi, K.C Kaushik, B.K Prasad, P. Parameswaran, Rajendra Singhvi, Ashok Kumar Singh, S.K Agnihotri, Vinay Garg, Deepam Garg, Debasis Misra, J.D Jain, Joseph Pookkatt, Prasenjit Keswani, Prashant Kumar, Anil Kumar Sangal, Anurag Pandey, R. Anand Padmanabhan, Ms Amritha Sarayoo, Rakesh K. Sharma, M.L Lahoty, Paban K. Sharma, Himanshu Shekhar, Ms Indu Malhotra, D.N Mishra, V. Balachandran, R.P Wadhwani, M.A Chinnasamy, Pravir Choudhary, D. Bhattacharya, Ms Seema Sharma, Prakash Kumar Singh and A.S Pundir, Advocates, with them) for the appearing parties.
Judges
  • Justice S.P. Bharucha
  • Justice Brijesh Kumar
Acts
  • Central Excise Act, 1944 (1 of 1944)
  • Finance Act 26 of 1997
  • Section 3-A in the Central Excise Act, 1944
  • Section 3-A of the Central Excise Act, 1944
  • Section 3-A of the Central Excise Act and Rule 96-ZO of the Central Excise Rules
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition

NA

Attorney(S)
  • H.N Salve, Solicitor-General and D.A Dave, A.K Ganguli, M.L Verma, Joseph Vellapally, Senior Advocates (A. Subba Rao, Ms Nisha Bagchi, K.C Kaushik, B.K Prasad, P. Parameswaran, Rajendra Singhvi, Ashok Kumar Singh, S.K Agnihotri, Vinay Garg, Deepam Garg, Debasis Misra, J.D Jain, Joseph Pookkatt, Prasenjit Keswani, Prashant Kumar, Anil Kumar Sangal, Anurag Pandey, R. Anand Padmanabhan, Ms Amritha Sarayoo, Rakesh K. Sharma, M.L Lahoty, Paban K. Sharma, Himanshu Shekhar, Ms Indu Malhotra, D.N Mishra, V. Balachandran, R.P Wadhwani, M.A Chinnasamy, Pravir Choudhary, D. Bhattacharya, Ms Seema Sharma, Prakash Kumar Singh and A.S Pundir, Advocates, with them) for the appearing parties.
Judges
  • Justice S.P. Bharucha
  • Justice Brijesh Kumar
Acts
  • Central Excise Act, 1944 (1 of 1944)
  • Finance Act 26 of 1997
  • Section 3-A in the Central Excise Act, 1944
  • Section 3-A of the Central Excise Act, 1944
  • Section 3-A of the Central Excise Act and Rule 96-ZO of the Central Excise Rules
See more information ...
Smart Summary

Factual and Procedural Background

The judgment disposes of a “bunch” of civil appeals, special-leave petitions and writ petitions that challenged the levy of excise duty on certain notified goods on a capacity-production basis introduced by newly inserted Section 3-A of the Central Excise Act, 1944 (via Finance Act 26 of 1997). The vires of Rule 96-ZO of the Central Excise Rules, 1944 and the validity of several consequential Government notifications were also attacked. Some writ petitions had earlier been entertained by the Delhi High Court, which granted interim relief on 28-10-1997, prompting the Union of India to appeal to the Supreme Court. During the hearing the parties informed the Court that the impugned scheme had already been discontinued and that the controversy now concerned only a three-year period.

Legal Issues Presented

  1. Whether, for the residual three-year period, excise duty under Section 3-A should be assessed on the basis of actual production for the entire financial year rather than on installed capacity.
  2. Whether the proviso in Rule 96-ZO(3) — which denies an assessee who opts for the fixed monthly payment system the benefit of re-assessment under Section 3-A(4) — is ultra vires or otherwise invalid.

Arguments of the Parties

Manufacturers’ Arguments

  • They no longer press any challenge to the constitutionality of Section 3-A itself.
  • Excise duty for the relevant three-year span should be determined on actual production for the whole financial year.
  • The clause in Rule 96-ZO(3) that bars an assessee from invoking Section 3-A(4) after choosing the fixed monthly duty regime is invalid because the final duty liability is to be assessed at year-end and any excess should be refundable.

Union of India’s Arguments

  • The Government accepts assessment on actual production for the full financial year for pending cases.
  • It maintains that the alternative procedure in Rule 96-ZO(3) is optional; once chosen, the assessee cannot subsequently switch to Section 3-A(4).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
CCE & Customs v. Venus Castings (P) Ltd., (2000) 4 SCC 206; JT (2000) 4 SC 77 The two procedures—fixed monthly duty under Rule 96-ZO(3) and re-assessment on actual production under Section 3-A(4)—are alternative and mutually exclusive. The Court relied on this authority to reject the manufacturers’ plea, holding that an assessee who opts for Rule 96-ZO(3) cannot later claim the benefit of Section 3-A(4).

Court's Reasoning and Analysis

The Court first noted the parties’ consensus that, for any matters still pending, duty would be assessed on actual production for the entire financial year. With that agreement recorded, the only surviving controversy was the validity of the condition in Rule 96-ZO(3) that forecloses recourse to Section 3-A(4).

The manufacturers’ submission that the rule “takes away” a statutory benefit was rejected. The Court emphasised that:

  • The option to pay a fixed monthly amount under Rule 96-ZO(3) is entirely voluntary.
  • An assessee cannot “opt twice” in the same financial year—first elect the fixed-duty scheme and then revert to actual-production assessment if that proves advantageous.
  • Venus Castings (P) Ltd. has conclusively held that the two procedures are alternative; once an assessee exercises one option, the other is unavailable.

Consequently, the impugned clause in Rule 96-ZO(3) was upheld as consistent with the statutory framework.

Holding and Implications

All appeals, SLPs and writ petitions are DISPOSED OF.

Direct Effect: For any assessments still open, excise duty shall be computed on the basis of actual production for the full financial year. The challenge to Rule 96-ZO(3)’s exclusion of Section 3-A(4) benefits fails; assessees must abide by the single-option scheme clarified in Venus Castings. No broader legal doctrine was created beyond reaffirming that the two statutory procedures are mutually exclusive. Costs were made “easy,” implying no adverse cost order against any party.

Show full summary ...

    Union Of India And Others v. Supreme Steels And General Mills And Others

    Brijesh Kumar, J.— The above-noted bunch of cases, comprising of civil appeals, SLPs and writ petitions relates to charge of excise duty on notified goods on the basis of capacity of production, as introduced by newly added Section 3-A in the Central Excise Act, 1944, by means of Finance Act 26 of 1997. Vires of Rule 96-ZO of the Central Excise Rules has also been challenged on the ground that it is inconsistent with the provisions of the Act. In pursuance of the above-noted provisions certain notifications were also issued by the Central Government, their validity is also under challenge. A number of writ petitions had been filed in the Delhi High Court as well and in some of them orders of interim relief, dated 28-10-1997 had been passed giving rise to filing of the appeals by the Union of India in this Court.

    2. Learned counsel for the parties informed that now the matter remains confined to a period of three years only as the scheme so introduced, has since been dropped. Shri Joseph Vellapally and the other learned counsel appearing on behalf of the manufacturers have stated that they do not challenge the validity of Section 3-A, introduced in the Central Excise Act, 1944. On the other hand it has been submitted that the excise duty may be charged according to the said provision, on the basis of actual production but for the period of whole year. Shri Harish Salve, learned counsel appearing for the Union of India submitted that there is no dispute with the offer made and also that the assessment shall be made for the whole period of one year, namely, the financial year. No dispute thus remains on the point and the excise duty shall accordingly be assessed in respect of matters not yet closed and still pending before the authorities concerned.

    3. Insofar as Rule 96-ZO is concerned, Shri A.K Ganguli, learned counsel appearing on behalf of the manufacturers submitted that the part of sub-rule (3) which provides that in case excise duty is paid according to the said sub-rule, in that event the manufacturer shall not avail of the benefit under sub-section (4) of Section 3-A of the Central Excise Act, 1944, is bad. The relevant part of sub-rule (3) of Rule 96-ZO reads as under:

    “96-ZO. (3) Notwithstanding anything contained elsewhere in these Rules, if a manufacturer having a total furnace capacity of 3 metric tons installed in his factory so desires, he may, from the first day of September, 1997 to the 31st day of March, 1998 or any other financial year, as the case may be, pay a sum of rupees five lakhs per month in two equal instalments, the first instalment latest by the 15th day of each month, and the second instalment latest by the last day of each month, and the amounts so paid shall be deemed to be full and final discharge of his duty liability for the period from the 1st day of September, 1997 to the 31st day of March, 1998, or any other financial year as the case may be, subject to the condition that the manufacturer shall not avail of the benefit, if any, under sub-section (4) of Section 3-A of the Central Excise Act, 1944 (1 of 1944):
    Provided that for the month of September 1997 the Commissioner may allow a manufacturer to pay the sum of rupees five lakhs by the 30th day of September, 1997:
    Provided….”
    (emphasis supplied)

    The submission is that final liability for payment of excise duty would be assessable at the end of the year; therefore in case a liability on the basis of actual production is less, the manufacturer should be allowed the benefit of sub-section (4) of Section 3-A of the Central Excise Act, 1944. It is contended that sub-rule (3) of Rule 96-ZO cannot take away any benefit which may accrue to the manufacturer under the provisions of the Act. The argument however does not appeal to us. It was absolutely optional for the manufacturer to opt for payment of excise duty in accordance with sub-rule (3) of Rule 96-ZO on the basis of total furnace capacity installed as provided therein. The manufacturer cannot opt twice during one financial year, first choosing to pay in accordance with sub-rule (3) of Rule 96-ZO and thereafter to switch over to actual production basis under Section 3-A(4) of the Act, in case it is less than the duty payable under sub-rule (3) of Rule 96-ZO. The said sub-rule is quite clear that the option under it is available subject to the condition that once having opted for it, benefit if any under sub-section (4) of Section 3-A of the Central Excise Act, 1944 shall not be available. We find that the controversy sought to be raised stands finally settled by a decision of this Court reported in CCE & Customs v. Venus Castings (P) Ltd. (2000) 4 SCC 206, JT (2000) 4 SC 77 It has been clearly held that two procedures, namely, one as provided under sub-section (4) of Section 3-A of the Central Excise Act and the other as provided under sub-rule (3) of Rule 96-ZO of the Central Excise Rules are alternative procedures and the assessee has to opt for one. Once having done so he cannot claim the benefit of the other.

    4. In view of what has been indicated above in this order, all the cases of the bunch stand finally disposed of accordingly. Costs easy.

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    Comments

    Union Of India And Others v. Supreme Steels And General Mills And Others
    (Oct 15, 2001)