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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
  • Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
  • Central Excise Act, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
  • Motor Vehicle in the Motor Vehicles Act, 1988
  • Rule 2(b) of the Automobile Cess Rules
  • Sections 91 to 93 of the Finance Act
  • FINANCE ACT 2004
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
  • Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
  • Central Excise Act, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978.
  • Motor Vehicle in the Motor Vehicles Act, 1988
  • Rule 2(b) of the Automobile Cess Rules
  • Sections 91 to 93 of the Finance Act
  • FINANCE ACT 2004
Smart Summary

Factual and Procedural Background

The petitioner is a company engaged in the manufacture of tractors and filed this writ petition seeking quashing of an advisory letter (Annexure P1) which advised it to deposit an automobile cess and an Education Cess. The petitioner contended that no excise duty is leviable on tractors and relied upon notifications exempting industries in Uttranchal and Himachal Pradesh from excise duty under certain Central Excise and Additional Duties Acts.

Statutory and administrative background relevant to the dispute: Section 9 of the Industries (Development and Regulation) Act, 1951 (IDRA) authorises imposition and collection of a cess on scheduled industries; pursuant to Section 9, the Ministry of Industry issued orders (dated 6-9-1985 and 22-3-1990) levying cess/duty on tractors and classifying automobiles as subjects of an automobile cess. On 9-7-2004 the respondents imposed an Education Cess @ 2% under Sections 91 to 93 of the Finance Act.

The respondents objected that the writ was premature because only an advisory letter had been issued and maintained that they are entitled to collect the cess under the Automobile Cess Rules; they also argued the exemption notifications apply only to excise duty and not to cess under IDRA or the Education Cess under the Finance Act.

Legal Issues Presented

  1. Whether tractors fall within the definition of "automobile" for purposes of recovery under the Automobile Cess Rules, 1984, and therefore whether the automobile cess can be recovered from tractors under those Rules.
  2. Whether the exemption notifications (relating to Uttranchal and Himachal Pradesh) that exempt industries from excise duty extend to exempt tractors from the cess levied under IDRA or from the Education Cess levied under the Finance Act.
  3. Whether the writ petition was premature or not maintainable given that the petitioner had only received an advisory letter.
  4. Whether, and in what manner, the Education Cess (2% under the Finance Act) can be computed and collected where the underlying excise duty has been exempted from collection.

Arguments of the Parties

Petitioner's Arguments

  • Tractors are not subject to excise duty; accordingly no cess can be levied on tractors.
  • The levy advised in Annexure P1 (automobile cess and Education Cess) cannot be collected under the Automobile Cess Rules in respect of tractors.
  • Industries set up in areas of Uttranchal and Himachal Pradesh are exempt from payment of excise duty by notification, and so no cess can be collected from them.

Respondents' Arguments

  • The advisory letter to the petitioner renders the writ petition premature and not maintainable.
  • The respondents are entitled to collect the cess levied on tractors as per the Automobile Cess Rules, 1984.
  • The exemption notifications apply only to excise duty and do not extend to the cess payable under IDRA or the Education Cess leviable under the Finance Act.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis proceeded in a sequence tied closely to statutory language and the administrative scheme actually in place:

  1. Statutory classification under IDRA: The court examined the First Schedule to IDRA. Heading 7 deals with "Transportation" and lists “Automobiles (motor cars, buses, trucks, motor cycles, scooters and the like)” under sub-heading (5). Heading 10 separately covers "Agricultural Machinery" and expressly lists "Tractors, harvesters and the like."
  2. Definition in the Automobile Cess Rules: Rule 2(b) of the Automobile Cess Rules defines "automobile" by reference to the items covered under sub-heading (5) of Heading 7 of the First Schedule. Because tractors are placed under Heading 10 and not under Heading 7, the court concluded that tractors do not fall within the definition of "automobile" in the Automobile Cess Rules.
  3. Legislative intent and classification: The court emphasised that Parliament, by the statutory schedule and the definition in the Rules, intentionally treated tractors differently from other automobiles; the general meaning of "motor vehicle" or analogy to the Motor Vehicles Act could not override the specific statutory classification in IDRA and the specific definition in the Automobile Cess Rules.
  4. Recovery mechanism: Although a cess had in fact been levied on tractors under IDRA (and administrative orders from the Ministry of Industry had specifically levied cess on tractors), the respondents failed to identify any prescribed "machinery" (rules or executive instructions) for recovery of that cess under the IDRA. Because no recovery mechanism had been prescribed, the court held that the cess cannot be recovered until such rules or executive instructions are framed.
  5. Maintainability of the petition: Given the absence of any prescribed machinery for collection, the court found the petition was not premature; the petitioner had no forum to challenge recovery because there was no mechanism to effect recovery, and therefore the court had jurisdiction to entertain the writ petition.
  6. Effect of excise exemption notifications: The court examined the exemption notification relied upon by the petitioner and observed that it expressly referred only to the Central Excise Act, 1944 and the two Additional Duties of Excise Acts (1957 and 1978). The notification made no reference to IDRA or the Finance Act; consequently, the exemption did not extend to cess under IDRA or to the Education Cess under the Finance Act.
  7. Computation of Education Cess: The court rejected the petitioner's argument that Education Cess (2% under the Finance Act) could not be computed because the petitioner had been exempted from paying excise duty. The court held that the notional excise duty can be calculated even if it is not actually collected, and the Education Cess can be calculated on that notional figure and collected in accordance with the Finance Act.
  8. Final synthesis: The court combined these findings to reach a nuanced outcome — tractors are not recoverable under the Automobile Cess Rules; the petitioner remains liable to pay the cess under IDRA and the Education Cess under the Finance Act; however, recovery of the IDRA cess cannot be effected until the appropriate recovery machinery is prescribed, and in any event the Automobile Cess Rules are not the statutory vehicle for recovery from tractors.

Holding and Implications

DISPOSED OF

Holding (core rulings):

  • The court held that tractors do not fall within the definition of "automobile" contained in Rule 2(b) of the Automobile Cess Rules and, accordingly, the cess leviable on tractors cannot be recovered under the Automobile Cess Rules, 1984.
  • The court held that a cess on tractors has been levied under the IDRA and the petitioner is liable to pay that cess as well as the Education Cess levied under the Finance Act; however, in the absence of prescribed rules or executive machinery for recovery under IDRA, the cess cannot at present be recovered by the respondents.
  • The court held that the exemption notifications concerning excise duty for industries in Uttranchal and Himachal Pradesh do not exempt the petitioner from the IDRA cess or the Education Cess because those notifications mentioned only specified excise statutes and made no reference to IDRA or the Finance Act.

Immediate consequences and practical implications:

  • Direct effect on the parties: The writ petition was disposed of in the terms stated above; the petitioner cannot be compelled to pay automobile cess under the Automobile Cess Rules because tractors are not covered by that definition, but remains liable for cess under IDRA and the Education Cess under the Finance Act. Recovery of the IDRA cess must await legally prescribed recovery machinery; Education Cess may be computed on a notional excise duty and collected in accordance with the Finance Act.
  • No extension of exemption: The court's decision confirms that an exemption notification that refers only to certain excise statutes does not, without explicit reference, extend to cess under a separate enactment such as IDRA or to the Education Cess under the Finance Act.
  • No change in precedent: The opinion contains no citation of binding precedents and does not purport to lay down a novel principle beyond application of the statutory text and administrative scheme; accordingly, the decision resolves the dispute between the parties on the facts and legal framework before the court but does not announce a broader judicial precedent beyond this application.

Costs: No costs were awarded.

    Indo Farm Tractors & Motors Ltd. v. Union Of India

    Deepak Gupta, J.:— The petitioner by means of this writ petition has prayed that the respondents have no jurisdiction to collect any cess leviable on tractors and, therefore, the letter Annexure P1 whereby it has been advised to deposit the automobile cess and Education Cess may be quashed.

    2. The petitioner-company is engaged in manufacture of tractors. According to the petitioner-company no excise duty is leviable on tractors. Further according to the petitioner-company, as per the notification issued in respect of Uttranchal and Himachal Pradesh the industries situate in the areas specified in the said notification have been exempt from payment of excise duty and additional duty of excise leviable under the Central Excise Act, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. The Parliament has enacted the Industries (Development and Regulation) Act, 1951 (for short: IDRA). Section 9 of the said Act reads as follows:—

    “S. 9. Imposition of cess on scheduled industries in certain cases.:— (1) There may be levied and collected as a cess for the purpose of this Act on all goods manufactured or produced in any such scheduled industry as may be specified in this behalf by the Central Government by notified order a duty of excise at such rate as may be specified for different goods or different classes of goods:

    Provided that no such rate shall in any case exceed two annas per cent of value of the goods.

    Explanation.— In this sub-section, the expression “value” in relation to any goods shall be deemed to be the wholesale cash price for which such goods of the like kind and quality are sold or are capable of being sold for delivery at the place of manufacture and at the time their removal therefrom, without any abatement or deduction whatever except trade discount and the amount of duty payable.

    (2) The cess shall be payable at such intervals, within such time and in such manner as may be prescribed, and any rules made in this behalf may provide for the grant of a rebate for prompt payment of the cess.

    (3) The said cess may be recovered in the same manner as an arrear of land revenue.

    (4) The Central Government may handover the proceeds of the cess collected under this section in respect of the goods manufactured or produced by any scheduled industry or group of scheduled industries to the Development council established for that industry or group of industries and where it does so, the Development council shall utilize the said proceeds:—

    (a) To promote scientific and industrial research with reference to the scheduled industry or group of scheduled industries in respect of which the Development council is established;

    (b) To promote improvements in design and quality with reference to the products of such industry or group of industries;

    (c) To provide for the training of technicians and labour in such industry or group of industries;

    (d) To meet such expenses in the exercise of its functions and its administrative expenses as may be prescribed.”

    3. Pursuant to the provisions of Section 9, the Ministry of Industry (Department of Heavy Industry) issued an order dated 6-9-1985 levying a duty on tractors @ ⅛ per cent ad volerum. The Ministry of Industry, Department of Industries Development vide order dated 22-3-1990 imposed duty of excise as Cess on goods specified in the scheduled Industry of Transportation known as Auto mobile. The cess was levied on motor cars, buses, trucks, jeep type, vehicles, vans, scooter, motorcycles, mopeds and all other automobiles.

    4. The respondents on 9-7-2004 under Sections 91 to 93 of the Finance Act imposed another excise duty called Education Cess @ 2% of aggregate of all duties of excise including special duty of excise or any other duty of excise.

    5. The cess levied on automobile is collected under the Automobile Cess Rules, 1984. The case of the petitioner is that the levy imposed on tractors cannot be collected under the Automobile Cess Rules. Further according to the petitioner, since the tractors are exempt from excise duty itself, no cess can be levied. The petitioner further contended that in view of the notifications issued by the respondents, the industries set up in the areas of Uttranchal and Himachal Pradesh are exempt from payment of excise duty and as such no such cess can be collected from them.

    6. The respondents have raised preliminary objection that since only an advisory letter has been issued to the petitioner-company, the writ petition is pre-mature and not maintainable. It has also been pointed out that the respondents are entitled to collect the cess levied on tractors as per Automobile Cess Rules. It is further contended by the respondents that the exemption only applies to the excise duty and not to the cess payable under the IDRA or Education Cess leviable under the Finance Act.

    7. There is no manner of doubt that under the IDRA, a cess has been imposed upon the tractors. The question which first arises is whether tractors fall within the definition of automobile and therefore, can the cess be recovered under the Automobile Cess Rules, 1984 or not?

    8. The First Schedule to the IDRA classifies different goods under different headings. Headings 7 and 10 of the First Schedule are relevant and read as follows:—

    “7. Transportation

    (1) Aircraft

    (2) Ships and other vessels drawn by power

    (3) Railway locomotives

    (4) Railway rolling stock

    (5) Automobiles (motor cars, buses, trucks, motor cycles, scooters sand the like)

    (6) Bicycles

    (7) Others, such as fork lift trucks and the like

    10. Agricultural Machinery

    (1) Tractors, harvesters and the like

    (2) Agricultural implements.”

    9. Under Rule 2(b) of the Automobile Cess Rules ‘automobile’ has been defined as under:—

    (b) ‘Automobile’ means motor cars, buses, trucks, jeep type vehicles, vans, scooters, motorcycles, mopeds, and all other automobiles covered under the sub-heading (5) of Heading 7 Transportation of the First Schedule to the Act;”

    10. It is clear from a reading of the aforesaid provisions that the intention of the legislature was to treat tractors differently and by virtue of definition clause, tractors cannot be said to be falling within the definition of automobile in the Automobile Cess Rules. Heading 7 of the First Schedule of the IDRA, deals with ‘Transportation’. Various types of transport vehicles are mentioned but tractors are not included in Heading 7. Tractors have been specifically included in Heading 10 relating to ‘Agricultural Machinery’.

    11. The contention of the respondents that following the definition of ‘Motor Vehicle’ in the Motor Vehicles Act, 1988 and the general meaning of the term automobile, a tractor is also a motor vehicle and should be treated as such, cannot be accepted. The Parliament in its wisdom has intentionally treated tractors differently from other automobiles. Tractors have not been included in Heading 7 nor are they impliedly or explicitly included in the definition of automobile in the Automobile Cess Rules which also specifically makes mention of Heading 7. We are, therefore, of the opinion that the cess leviable on tractors cannot be recovered under the Automobile Cess Rules.

    12. Though there is no manner of doubt that cess has been levied on tractors, the respondents have failed to point out to us that any machinery has been prescribed under law for recovery of the cess. Therefore, we have no other option but to hold that the cess leviable on tractors cannot be recovered till the rules are framed or executive instructions are issued for recovery and collection of the cess.

    13. In view of the fact that we have held that there is no machinery provided for collection of recovery of cess, we overrule the preliminary objection raised by the respondents that the petition is pre-mature. Since there is no machinery provided, the petitioner has no forum to ventilate his grievance. Therefore, this court has jurisdiction to entertain this petition.

    14. However, we are not in agreement with the petitioner that since tractors are exempt from payment of excise duty, no cess can be levied. The exemption notification has to be construed strictly in accordance with the terms of the notification. Tractors admittedly are goods on which excise duty/additional excise duty can be levied. However, the State in its wisdom thought it fit to exempt tractors from payment of excise duty. However, this exemption cannot be extended to the payment of cess provided under the IDRA. No notification has been brought to our notice whereby there is exemption given from payment of the cess payable under the IDRA. In fact as pointed out above, the Ministry of Industry (Department of Heavy Industry) has specifically levied cess on tractors.

    15. As far as the notification regarding exemption of industries from excise duty in Uttranchal and Himachal Pradesh is concerned, the said notification specifically states that the industries shall be exempt from the payment of whole of the duty of excise or additional duty of excise leviable under the Acts mentioned in the notification. The said notification only makes mention of the Central Excise Act, 1944, Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. This notification makes no reference to the IDRA or the Finance Act. Therefore, we are of the view that the petitioner is liable to pay the cess on tractors as well as education cess.

    16. The contention of the petitioner that the Education cess is levied @ 2% of the aggregate of the duties and since the petitioner has been exempted from paying excise duty, this 2% cess cannot be calculated, is not tenable. The excise duty can always be calculated even if it is not collected and on this notional calculation, the education cess can be calculated. This cess has to be collected in terms of the Finance Act. In view of the above discussion, we reject the contention of the petitioner that it is not liable to pay the cess leviable under the IDRA or the Education Cess levied under the Finance Act, 2004. However, in both the cases, cess can only be recovered from the petitioner as per law and cannot be recovered under the Automobile Cess Rules.

    17. The writ petition is disposed of in the aforesaid terms. No costs.

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    Indo Farm Tractors & Motors Ltd. v. Union Of India
    (Jul 16, 2007)