Bhuwalka Steel Industries Ltd vs Union Of India Rep Herein By The ... on 15 March, 2010

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Karnataka High Court

Bhuwalka Steel Industries Ltd vs Union Of India Rep Herein By The ... on 15 March, 2010

Bench: B.V.Nagarathna

 

in: THE man comm OF KARNATAKA AT BANGAL§}ﬁ"'§§..

DATED THIS THE 1s"*DAY OF MARCH, 2c;'m  " 

PR ESENT

THE HONBLE MRJUSTECIE G§):F'P§L}1GC)'¥?«%E)AV.L  ' _ 

AND

THE HGNBLIL'. MRs.JUs9fr;f3;» B.v.N'AGAI1?AT§§pzA.V

WA.N;§~;.536IéQQ'?'f§'~;fAR1

B ETWEEN:

1. i3HU'.x'AL_g<A_ §TEEI;"ifif{I3iIS_E'I{i.ES LTD
I~iA'~{_iN€;I'FS«:_REGE;» OFFEE ATVEBHUWALKA
{?'33N'l'§%.!3iiNQ.'?}-ii; SEQ'-CROSS,' RESi1)I§NCY ROAD
B-AN(,':ALGR'E._25, REPRESENTED HERE EN
BY. yrs DIREGTQR. 'SR1 EEURESH KUMAR
B1«w.wAL1<A.. ' '-  '*

; SAJJAN KUMAR PJHUWALKA
 '~23/_;0 LATE SRi._._B#:LCIIAND BIIUWALKA
\%  AGEI350 YEARS
  Bl_3fU*«§'«ALvKf& Crarerrzg
 I-:.<3;f;f1, 35%;; cmss
; '~'m2:$;:'I:.F:2sacv ROAD
 E3Ai'~EG{§;LORE~S6O 025

§-.}

 ;:;g,{§;;~:; NAGANANE SENIOR COUNSEL FOR
M/s  W  ..ms'r LAW, ADV.)

AND:

L UNEGN CF' INDIA
REP BY THE SECRETARY
GOVERNMENT OF' INDIA
BEFARTMENT O? REVENUE 

W

M...



 

1%.}

MENISTRY OFFINANCEZ,
NCJRTH BLOCK
NEW DELHI 13.0 011

2. COMMISSIONER OF CENTRAL mxcxs1'2;_._  A "
BANGALORE I commxsssommrzars; % '
CENTRAL REVENUE BUILDING % ' A
QU'8)EN*S ROAD,  
BANGALORE-560 001.  A %

  'r2T:?:sP"'cn§ti),=':reTs V

(By 313; B RAGAVENDR}K,-..FOI€ §1?i  ":3;IAs§{AR,"{:Gsc,
SR1 Y HARIPRASAD, sang. ,FOR?.;.R:e1"=& ~R;)'~ 

WRIT A'R'£_'E.¥§L 9;maij'v«:i;--3."»%,4" ""*rii'1:: KARNATAKA
HEGH c:0um:' Af§.F'PRAYINf§ TOA"SET._.5§SIDE THE omen
PASSED IN ~-"i*I%1.131w.;_:{;1' ._'§'I§}'i'!f§'ION»f.' No.45 12- 14 ; 2903 DATED

08/02/2007', i__ 

ifhis m*A%'jc1j:gﬁin.g'%£o;~%M Prtzlijliinary Iieariug on this
day, "N 54,??? - iﬁdeﬁzvcred the fo1iowi1:1g:~

gvnamgnr

VV   =  Appeal is ﬁled against the order dated

 '  :LIE}1:ss;«€:€i by the learﬁed single Judgﬁ in

 w.p.rx%§;sa:;12/2903. In the Writ peﬁtiml ﬁled by the

  keratin, thﬁ Consﬁmﬂcnal validity {If neﬁﬁcatien

$30.29/200% in 30 far as clause: 4 is camzczrned was

chaﬂenged am} also a declaration was scrrught that para 4 cf

the cir<:11}.a.r bézaring No.32?/2000 is iikgal and

uméafotxteable mi} other iimideixtal reliefs. The said WI'it

ﬁe»



 

petition was éiisszaissed by the Iearneii single Judge'~.._and

hence the appeal.

2. The appellant is engagee!""';ie.--.¢   (ﬁfe V'

1118.E1'£]faC:t11i'ij"1g steel and steel     .'

at 'White Field, Bangalore,   at  " V L'

and another factory at   to .£1ie~  the
Central Excise Act,    _ pmvkies for the
levy' of duty of e3:c,ise Jgoods in imiia.
The Act   duty for various
geads   tax. The appellant
is a   eteei rolled products and it is
O pe1'aﬁngVV'ﬂ:_1§"ee   J:ei};1S in the State of Kaxnataka.

;§«r<'>:1uets~a:3J:e:  under Chaptex' "$2 and 7'3 of the

.'   Act, 1985. The steei rolled protluets are

 :'é1i*e_jee{'  rate {if duty. The eiuty payahie is

baéecl  the value of g-made manufaetizred and cleared

V  _ V' frem  'licenced premises by a mmiufaetunen

 u   'Hie Finance Act, 199'? bmught about certain changes

if: the Scheme esf ievyiug excise duty in the case of steel re-
i'0}1i11g iziduatey'. By Secti-cue, 81 of the said Act, a new
Seettiim eatne 23;} be ismerted in the act i.e., Seszztian 33%. which

:'~/X



 

£5

came iuto efféct on 18.5.1997. Seciimi SA speaks Qfi§d*2§e1'

of tha Cemral GOV€'.l'{1i11€i1t to c:§:1a.rge Excise Dirty'  

basis of capacity of pmd11<::ticu1 in respect of  -- 

By a notiﬁcation thé g0'V€1'£|j11ﬁi1{ liéétiﬁﬁd  

ﬁxcise duty was 'ac; be lezviﬁd 3113 c011écte{iV.dutyj 31'; .s§Cc{3Ki13i1ce' 

Wiﬂl the p1'0Vi*3iOi1S of said  The  {§{3yéi9ﬁme11t
by R"l11€S also ' p1'0vid«':§If0r   annual
capacity of pmducrtion     rc1evan't., by
Wllissh such  *    v Commiss-£01161' of
Cantral   of produeﬁan was
:".i:":e5;11€j.d    «sf such goods by such
fact0z3:%V;'_A   claimed that the actual

p1"0ductié1i'~af 1:u:;tiﬁéci.v  in his factoxy is lower 'l".1"}.E£.!'1 the

  p::§£'%u{:ﬁ0z;_ ﬁefiéxiniﬁxit, than ﬁrm Commissimxar had to

' ::1éi;&ifn:iiican11ua1 pl'()f111C3Ii0i'i and re~€1etern1im3t ﬂie

  payabir: by the: assatsser: with lffifﬁiﬁﬂcﬁ to

Si1di1..Ei"(3t11f:} pibciuciicn.

  T115 Iegisslativé background ':0 the intmiluctioﬁ of

 Sectioxx SA is necessary in 135 stated at this gtagss. With the

i;1tr0ducti<:n3 GfVa1ue Fxécled Tax :31" VAT as an indimct tax by
'Kim {}:3ver:1;::u.:;1t of india as part {If its taxation policy, the
fﬁgiiilﬁ cf indi.::&a:=.t Bax §.EV§,e' was mwukied i3}ti.u1at::ly as gains

(Ly
' 2'

M'



 

U1

added tax. The first stage crf this transformatioxi x§a:§ 'the

intxxsductimi of a Sﬁhﬁﬁlé known as Mlcvdvat. The  

Modvat later came to be known as CENVAT. _, __ 

£3. Certzain changes wergar  tEﬁ't*:C'1itEid' v-'LB  "case; 

mumixxium mﬂing industry by ﬁfoﬂriémg fcir  of VV

composite: excise: duty 'Rs. _? by tiié  W110

were manufacturing  diameter of

2063113 and Rs§*'1G_;Qf}0I -:=:p..:;1    <":.i.m1e$
exceeding    relliag industry was
    téase cf steei rolling mills
311:1   introducing these c:hm1gt:-.3

Sect':-:_n1 £3A £:mp:3wered.V Ceiitral Govermnent ta nutify certain

 V,  _  {T} be "g0v::..ms-::d by the mid Section. with Eﬁéct

   1   Cenna} (}0V€i'I3.I11€[1t Bﬁﬂﬁﬂd hat re-roiled

fmjﬂﬁcté  V;ioVi1~a11oy steer} as one of the pmducts is?» be

 govﬁﬁétg  'Ehﬁ scheme: of Isvy' as per Section 3A 0f the Act.

VA ~ gaoﬁﬂcation is dated 25.7.1991 which is produced as

 ;§si1iAexure~A 13:: the Writ petitian. Far this purposa in

cxémists: of the pt3WﬁI"S conferred 013. th& Cﬁntrai Gavernment

tzuxdﬁr Sacﬁ-an 3N2) {if the Act, a xlotifxzation wag issued
ffamiixg the Hot Re--rv:>}1'Lng Staci Mills Annual Capacity
$&t:*:r111i;1ati0:1 Riﬂes of 199'? W}.1i§::1"1 pmvided fern:

I',



 

M 6 M
détermination of the mmual Capmity of production of
ma1111fas::turer by applying a formuia which is ccmtaijiﬁd in

Rule 3(3) ﬁlemoﬁ
6. By the Fixxance Act, 2001 Section 3A was on1itt:=:ai--.with

eﬁeet ﬂvrm 11.53.2001. Tiwmfore, for the 

which Saction 3A was in force Rules of  

Crmsequamz upon the Withdmwai ""i:vf~ «    V

Central Exétise Act, 1944 Wiih   ._

mull' S and inductixm fumace 1in.i1;§..be:*,an"";a__  V

duty a11*"'a§T}§;;g1oi%é§;;n- 13:43-is ag-;.e£ the CENVAT Scheme.
{}m'iug ':_t}1'e _  3A was. in operatian, the

units wer;éL:1fjiv.e]Vi'gi}3I€;'vtc« CENVAT emdit on tha irzputs

 V. A' asv_~d§;:£y'LAwas ;f>;aj:ab1¢___Qn the basis of the 311111121 pnxiuctian

~ <§'a§;1;;;ci.,g'z1e:%;;££*;33i11ed ixzmspeiztitvta 0f the actwai pmduetion of

  aﬁésct from 1.4.20ﬂﬂ under Rule 53'? of the

Ce'1'.i't.t~ai'----V:I3.x'ci:s>.e Rules 2000, 33} rt:-miling mills and iudncﬁoa

R   }fi3.:::;acé"':;inits became: eligible for availing CENVAT credit. In

: ezaf iilis transitioli it bccame neeessary to pravide a

  13911813: 0: mechanism '£0 enahlc: them mamlfacturing units

to avail tbs beneﬁt Cif CENVAT créidit 011 the stock of iniauts
lying with them as on 1.4.2000. Such a tl'a.if1$i1i0I§f pmviskan
bﬁliﬁéiiiiﬁ imperative arid accaxtliagly, the first ;*&spm:u:1c::;1.t


If?' .



 

issued cimular N-{L522/2000 on. 31.3.2000 (Am1eXure'"-~K).

The said cigncsuiar, inter alia, provides that 

ﬁnished goods lying with the re--m1}.L£1g mills a11é_:'i.n::xi1:ei§er§V.'''_<'e "

furzfxace units as on 1.4.2600 may bg=;'ti*eat-ed as  it'  

was directed that CENVAT -credit meg;   

enf stocks of input material  

mills and irlduetion. funzigaee 1;1.1_.i.t.'-;%.".a's".._;§J1  Such
credit was to be allowefi Teatigf _ of stocks
which is    documents.
    first respondent

issued t:1f_1L_gf3e1*~.§3:"1;:1L4:_. Rules, a declaration by ziotiﬁeétioix " elated 31.3.2000 {amiexuze-L} with ee1tait:.._ite:ne as ingruts in S1.N0.1 8:. 2 at the v ta13'1t§.:eerﬁta§.;1ed 'i12.t1_;ge;_«sais:1 llﬁﬁfﬁatiﬂﬂ shall be deemed. to be ' qtiitye 12% at the price declared by the manufactmrer the credit {if deemed duty was to he aliowed j to V".{t1a.1:is1fa.ct11rer of the ﬁnal precincts. The afcvresa id 2 ., §:;.»:)tijicé:tio;1s were questicsmzd in the WP. Vt E1} the case (sf the appeihtlt with regard 1313 the three: {sf its 1111313 it had stoekg of ingots, Biﬂets and MS wrap, all of which are eligible £31" éieemeé}. CENVAT credit or at me rate at }.2%»i.: Where the gcxads haé. sufferesti duty 1.u1der Seetien SA 0f .//, .... Q ...

U the Act and 16% Where the gocxds 113:3. enﬁemd duty under Section 3 of the Act, certain investigations were cari'iei_i*out by the Excise Authorities which led tn the i;&';S11f:3i_=;'irZ.'<'i«i Show cause notices to the appellant in V with regard to the notice issued factory, K0131' and Ilosakote fa:ttoi'iee'«:;f'the itxiéaei the eorltentioxi of the Excise P§uti';10ritieS"tl:1é£te fﬁleiiivgmpiﬁeilant i had erroneeusly availevtii Ezﬁfitlloiiliiviitﬁﬁiiiiékbliﬁiiiillg the fact that the inputs as on 31.3.2000 are suppoitedibgt ii:i§cu;iieiiit.$r;v.as}'jt%fi.e inputs had not been reaizeivetii fine" of the manufacturer. With ta iliosaliote factories, the Excise autlioritieuée.._eb;:te§terIA._ﬂ1e_i1.'i'c]aim of the appellaifxt that the _ steak. efi'i:1putsiivreife_§f£;.pp0i'ted by duty pair} documents. All .tI1e_si10v«.=i --:';f.-émse imtiees were pursued and a eammon dated 24.10.2®2 was passed by the of Cerxtral Excise and the appeilaztxt ehzaileﬁgeii the gait} erder before the Customs Excise 33 i Eieiviee Tax Appellate Tribune}, Bangalore. The appellant

-*v---sixalleugeei the said order of 24.10.2802 befetz-re the (lust-Lame, Excise er. Service Tax Appellate Tribune}, Bangalore and sought far stay of i'ﬁC(§V€1"_§:' and Waiver of pre-dep0sit of duty gtiemaizeieszi Iltiflei' the eairi :3rder. An rattler {late 9.9.2002 has /9%, been passed by the Tribunal 0n'Ierii1g deposii of Rs.-4i'3,00,000 by 30.11.2002. AC€'.:O1"t"1i[i.g to the i&pj3€ﬂ.éi§Iii.','«.4itKii§i iegaiity or ccmstitutionality of notiﬁcation . Cmular No.522] 2000 cannot be or ii"

t11e Appellate 'I'rib1znal. However, {ha Sg'€*i.iI',l;I"2 vialative to Article 14 of the.'iiC:7;;1stii§u.f__i{513,V haiiiigj ixvrit 1 petition was ﬁled. The leaned Juiige ':or¢:ifa:r dated 8.2.2007 dismissed itzy to eonsisrler the c:0ﬂsﬁtutionaiV'va]idityV_iéiitiiéi tiotiﬁcatiou 011 the ground cu5'11§i.itiir:m<1.Viiin the appeal or £'6f€1"611C.(:" the Tribunal. Bﬁing agg:'iev£§cI by 'flit' {his writ appeal has beret; pE'€:fﬁl'1'£id. ii learned Siugla Judge in the Writ petitizm the ,t*¢$;:)i_<;>i:i<:i:3ix§(":._:V_ .:%f§ﬁi'1orities filed statement ef objections coﬁtegiidigig in virrw (if time fact that the payment ﬁf the Viﬂiity 'W;&ﬁ..a.iS~C&ﬁﬂﬂu€(i unéer Section 3A W.e.f.., 1.4.2000 an i rii£;i'zEr.t;§ﬁz3zei2t had bﬁfiil made tcs ensure that the duty paid 83 31.3.2000 was fully trcavﬁreei amt! pmtﬁcted and the CENVAT 'é"sCi1t?:iI1€ Cifftdit given fit: $13611 stack which WEEE iyiifzg 35 an 1.4.2000 with proper dmume:1'£ati0;1, cmztainizig a €iﬁC§8i"'£itiQi1 {:3 tin': eﬁﬁct that duty had "£36611 paid llﬂdﬁf If).

<3;

/ wig...

Section SA :31' the Act. Awarding to the re$p0:1dent authorities such a requira=:me11t caxmot he': termed as arbitrary 131' unconstitutional. The second respondézﬁ; by under in Original No.29] 2000 dis-ailowed deemed bf Rs.4i3,55,{)0,000f- in respact of Appellants "

factory, Rs.1€3,42,00,GO0;'- 3.13 resp-::(:'i»::»f in ' Kolar factor and Rs.29,56,oe,eo01-"-in }Qn9Sf:e¢";t--e;ff in Ilosakote factory equiva1és1t "" V_umié§i_A ...5'i7AEI * L' read with Section }.1A()_ was 'Thﬁ: Aﬁipéﬁmlts e1].3}}e13.g&d the said 01t!';é:*«'Ti:;1":3_e;'ifg}J1'a'.1"*VLi'ViV:)f: i«'i3r€: camm'. The TribunalVw'h§iéj;'c0:i§{§;idei'ii:g. 'ﬂié"a;2piicaﬁon for i11tser.i111 orde:

direct:ééi_ t11§at' _;of I?.s.4f~,OO,{)(}()/- shouid be madé a;1du'W§ji<;}1 v1Vias3¥AE"5%E:r;;_".i1&p0Sitf:d by the apgseﬁmat. * _ hr:~:a£d thé learned Seniar C-K")-"i1i1S61 for the " L: .. the leassizccl eounsal fax' the itsﬁcaéiantf autheritiﬁs.

iﬁ; It is centeﬂded Cm hehaif 0f the appeiianm that for me "'";';}eriod between 1.9.1997' to 31.3.2000 Section 3A was in feasts: and no siuty was payable on ad-vaiorém basis dming ﬂzé: abmre pﬁriod bezcause of £115 riuty was bﬁiﬂg paid on the basis of ﬂit: amma} cagacity zamti nix iiuty paying €§{)C1l§33.tiI3.tS '%".> _:_z.

documﬁixts G1' the invoices have to be produced. There e:am:u:<t be 3 straight jacket formula in the matter mi' Vtaixgiijpii 21$ ﬂat: parliament and legislature in its Wisdom haife % these matters keeping ii: mind the i1EltE11'_f3~ éiéiéilt {if evasiwn of duty by the assessess é«,11d the intsrest of r2?,ve11ue. {Ia 1}V'.r"i34i'&1.'l£3lfi..i11313i1 ce.:*fairi tiecisibiai *' in S11i3pOft of his argnmenm. :

12. Having bean"! the. counkéti both «Si.:ci+&s;i and on paerusal of the materiaisa points arise:

for em co£1sidcji'.aiia::..n, pendtmoy of the appéaliivfilﬁirl ibéfore the Tribunal, it is just and pmgieg ii to tilt: c-mzxstitutimial vaiidigr sf natifigﬁﬁen 22300 ﬂateci 31.3.2900 t.?:iI'Ci1}iEl.t' 31.3.2800 (AnnexuDe--~L «ﬁr. K). (2) if thﬁ auié.;we£" No. 1 is in the affirmative Whether the afofesaitl 2';imexm':*:s "L" and "K" are ultra vireﬁ the V {3:T,"1';Zi.$ti'¥ii7£.i(T>iZi.

V' 18. At the sautsei it is nﬁcessasy to naﬁcc that constitutional validity csf {ha prvsvisians have been challenged ihlfiﬂg the pexzdeﬁcy Gf €31-:3 appeal befom the Tribunal. As far 51% Cilaﬂﬁiigﬁ ﬁf c:s3:1s'§:ituti<3i1ai vaiidity (>1? fima} Etailitﬁ and ._, _.

ru1e$ are €:0i1C:€1'i".i.i'.';d, it is necessary to advert to the dccision of tile Apex Court in the cast: of Gujmnt Ambuja _{?$_§1z1ie£;1ts Lhnited Br. another Vs. Union of India 8:. "f.:_1_ . (2005) 4 sec 214. In the said casfg it has*'be§a§3g.1gcid'--:he§£ ~ because of the inhere11t cumplexitﬁié :3f -ﬁﬁeizaf divcrse elements in the ﬁe1d.___ of the p«3i'm§tted in the large nfgatiei" :31' ciassiﬁcatioil to deterrxﬁde unﬁt ._ye}§;at% shm1ldV be taxed, but also the manner in inlposed. Tllat Courts are -Mira. questioning the 1'easona'§i}it§:t":jf V§iach"'~s:Iassiﬁéaﬁéh but after a "judicial g€11en:sS:i1y" is Vt:§f5§.."{V¥Vfﬁ;?;ii{'}.'é(i' légisslative wisdcam, if there is Writ an ﬂie-. s1:atute. p::i"va::;$it3r, 'madness' in the method or V. A_ gixjsés. c1i§parity,A}"u:l.i§:__ia3 credulity may snap and the maasure ' Vi::1§:_e':x~:=T.'_';«'£i': fum=:ra1." (Vida Ganga Sugar Clorporatiml am of 3.? (1930) 1 sec: 223. The same ~V is expnessed in Federati-0:1 éf [metal 65 I§E:§i;au_£ént Asﬂiaticn of indie: Vs. Unien of India Iﬁpﬂffﬁd ' "';;{{1§39) 3 sec. 634 whmin it is statﬁd as fzrxliccxwsz "I2 £5 mm: weil settieaﬁ that ﬂmugh taxirtg laws are not outside Artioie 14, however; having regard 30 the wide variety 0f diverse eommrmk:

criteria that go into the fonnulaifon of a fiscal paling Iegzsfature anjczys a wide Iatitude in the matter of seiection Qf persons, subje.-3% matter, 1%- /'

-14..

events etc": for i4'1.xZ£1fi<)i'i. The tests cf the vice of discrinrainatian in a taxing Iaw are aoaordingiy, less rigorous. In examining the aflegations of a hostﬁeg discriminatory treatment what is looked into is net its phrcesealogy, but he ma? effect of its' " , provisions. A Ieﬂlanxre does noi, as an (_:3d_ saying goes, have to tax everything in or'ds€.¥.'_ able to tax something. If iiuéna is equality and'. '7' ucngformity within each group, the law would be discriminaiory. Decisions cfmthis amzrfthe. ' _ matter have permitted the iegislatursrs Ito exer<':i¢;eV ' cm extrernely wide discretion in c!aLs;3§fj"yingA..iten':£-3 , fbr tax purposes, so Iong as it ixzﬁazins ﬁom dear"

and hostile di:-2c:'irr:fnr1ii£1:_1 Persons or élcssses." V. ' -.

14. It is also xiecessaxftn ad§e;f{vte._g:1§{)the1' dméiéion of the Apax Court in thii case Q_f_ hidia Vs. Vrajlal Kapuxtjhaini mported in (2003) 6 SCC {W3 W}1€i't?.ii1 i'.i__h8.S hﬁsiiflzét it is fairly sgettleitrl positima of 123% !§};:1tLAa V'*3i'1 a 'E'ri15m1a1 czonstitiitecl made? a statute . _.g3;aﬁ':i§}t E»~.%1:1ji1aiic:atx=:« Viijién 111:': constitutionai valiciity of thﬁ Therefom the learﬂeti single judge was :1a$'i..44;;ig}a'£. L'i:1u']V::c1i11g mat tha vires of Aixnfzxum K and L maid

-.bt"i coiiﬁﬂamd Whﬂe réxercising appeilatta jiiriséietion uncier V'_':31;¢ S"§atut&. shcsuid the appeﬁant fail before 3:16 irihmial also. ' ﬁance ﬂifi pﬁiiit No. 1 is aaswttmd in fEiVO'i}_F cf the appeliant by balding timt writ court can dmtidé thﬁ coilatimﬁ-anal v:31id.ity'* {if a fiscal statutﬁ <31" provision theugh the marits of the casa is in challeﬁga befan: an a.11t}1<3rit;¢ 01' trihuixal 3 if g..J {J1 § constituted under a ﬁscal statutﬁ or before '£116 iilldfil' appellaté juriscliction.

15. As far as point No.2 12$ conc§e1*:1ed; « §u:1 01t1.t:r aIiV$§:?'&f;' the samﬁ, the baci-tgmuxzci facts thej§1p;:}éi}é11t3*. the manufacture of steel its Wﬂefore iixtguduction of Section of ﬁié induéﬂoii furnaces, stﬁel re~r011ing mills} maﬁL1ﬁ1fa<§tu§'&iS .3§vt:_1*e liable 13;: pay duty on ﬂ1e_gb}g5¢;:1s fzieaxed from the imiuction :{'s;i1'ﬁ27_a:3c"::~?;-':V--_;:;1.* «st::éi~~_né¥§:x§lIiz1g 1111385 on ad-valoiem basis. was inserted in the Act, by an object of levying duty on the basis "Qf pI'0d1i€.'tii.Z}11 capacity 13f the mard:ifé1<:tu:*ix1gV" vfifﬁth aﬁcci fruit: 1 13.199? in curler ta <:'r:a}:: .~3§r :au<,*..ix:-;;{'<--:f:i' duty by the iuductioﬁ ﬁlruaces, steel re~ ' 'i"f'£13ﬂZ..§_J''i'g " '~. } Ix3Wevet', on account of diﬁiculﬁes in its &i11T:f§E'iL'6L¥fi-t'$}3'f;..V' Section 3A was onlitted by the Fifiﬁllfiﬁ Act, VTI.§.er&forE, Secﬁoﬁ GA was it}. three with eﬁact {mm T. Q' *3 }1 '.€}--.i99'? tr: 31.3.2000 1311137 aad on the omissie-1:1 0fSe<":1:io;1 % 313 the inductian faiinaces, Stﬁfil re--n311i:3g miiis became VV liable-:: to pay" duty on ad---vala':-rag; basis. Aﬁﬁf omisskan of Sf:CtiC3.1'.i 3A, the ﬁrst mspogidcﬁt issuﬁci ilﬁﬁflﬂaﬁsbii Pwh-3.2%/2DG{} on 31.3.2889 311:1 eixxéuiaj" N0. :..'"522j2ﬁ3(} iiatﬁd 9%» M).

M16"

3 1.3.2000 which aff: under clmﬂenge, 'Lu oncier to give be11eiEt to induction f11i'1"1aC&S, steel nsmtrlling mills u114t:{je§1*_ t1;_1e CENVAT credit. Ilowaever, a condition was i1*1se1"'tv_e=;i_1"i;u«' _ {4} of the notiﬁcation and the Cincuiar VV CENVAT credit; Céiultl be availed by dxbcuments. . r

16. It is the said clause uﬁder sjtliis "

appeal. The aforesaid ;'.l§0tjfiCEil{iGJi '31V}'€:§ Cinziiizzr have been introduced to give bexnéﬁi to «:maVi.m:._1£%3;iét1;1'ers who were paying ,.;}'utyf :'i:;{c1§s;§::gsectignv':§A-- ~41-ftilc Act to avan CENVAT cieéiit m;"w1;;.;c;a were lying as smks as on 1,4.20{}0. ¥{::)xx»'téJ1éf,.' notiﬁcation and the cimular tliaﬁi" pair} clmuiztzmnts issued by the ».§3ﬁa:1u£act3.;x*ets. i_.e:., invoices shauld be furnished in order to },:sé7a' ;1%t1a"e $1" CENVAT credit which have been issued. at t}."1€'.."':L.i.§3£}t*i:%(.)f'{';1€Eii'ai1Ct": of the manufactured gtmds. Thﬁ said . n-%c;1;i1*ei11ént of productima of cluty paying dmuments er "§.§iéra;i£§es is questioned by the appellant (311 ﬂfiﬁ main gmimd ~»v-iiixat Whﬁﬁ for the grxerioé duriﬁg which Section 3A was in operatimz, the duty was being leviged not on ad-valmmza basis, but an the: basis of a1:;11ua} capacity of production of thss: [l1a1"1Uf8C'§ZULi'ii"1g unit. Durisig the pmriod when Sectim: SA I;

2'°'z/1 W17- was in operation, the units were not eligible to avail CIENVAT credit as duty was payable on the basis of production capacity )d{i'{ﬁi'ﬂ1iIl€d iarespective of the actual p1Uducﬁ5;1 0f the goods. But with effect fmm 1.4.2000 ail and induction fumiace units became c1ig1'I)1;:""'f4:0i" K V' CENVAT cynedit. In such a simatibii it'1'3Lc..vii:t_sis~s'i£i1:1:ii';.=:_VQii'Vthé1 pmductioiz of duty paying documeszitﬁ the not in aecxnirianee with the Act' fh61'ETﬁ.";ii€,vw.if'_iS'vtfﬁiﬁffiildﬂd V by the appellant t13.atVt'b.§ and are uitmvires of the Act.

17. I11 45;*;:¥c:1' 1:5 ézontantion, it is necessary to uz1de:*sts3iic}..f.11e Schéme which is new krmwn asf €li*<":€1i.i:____$g?:}:1r::i11a=;. CENVAT credit scheme is a ' '%Ja3§i£~ ___Added Tax w11ir;=}:1 can be availeé by the avoid/ts: mduce the tax bnxtien 013. the end uséi' H é.:;si' to avaid the znultiple stage of taxation. ., ﬁccgréiiigiy, CENVAT Cmdit Rules af 2001 were promulgated jpresently there are CENVAT Credit, 2064 eﬁecﬁve from M " "1o.9.2o<34. The dwuments that are required an be pmciuwd fan: avaﬂiiiiﬁilt of CENVAT cnﬁdit by a manufacturer cf the {ma} jmsducts is an invoice issued by a manufacnnfir of ixépﬁts 01' capital gaods fmm his factoiy 01" Erma: his depot or fmm 'the pmnlises of tha consignment agent or ﬂQm_ a§1y other pnemises from where the goods are sold by_c}f % of the said nxanufacturer 01" by a naanufacttir.-u;_:'§3f 9 products for removal of inputs or é11t":}::.i sugplemeﬁtary invoice issue(l,i3y_.a m)a.r;}ifactu§s5é L» of inputs ors::apita1 goods ﬂ13n:; hI*;;'.§'fagtg;§$,--. _¢3jf"f;¥£3111.':'};11§depot or from the-': pnemises "£116 the said manufacturer of from Where gocsds are 'on Vmanufacturer or importer £31" excise and custom t1utiesVVVVi'1'Q.%. of and a certificate issued by a respect of gonads imported tlmmgh ~Vfy:i1':=.igj1 Oﬁce. A maeaumturer taking a",»n:ditAV{ii:1~*--§:i1puts er capital goods xeceivcd by him 11é§{§'td'--v.f§ix§ﬁ§éh--.§Imtumeats issued by the suppliesr and the .C1f_} R'§'A'§;. %;::~t~:;:;4; will be allawed if utilized inter aiia, for the pafmagiﬁ 0}' any duty of Excise em any ﬁna}. product or an A ' _" equal ta CENVAT cmdit taken an inputs, if such fir11:);uts are remavetl as such or after being partially V' " processed, an ammmt equal to the CENVAT credit taken on capital goods, if such ezapital are removed as such. M. ..

18. According to the respondent, the manufacturer has to produce the invoices; ix-2., the document showing pay.me;1t._of duty issued at the time of clearances fer ix.)f" _ CENVAT cxedit and the same is mandatory. _- ptujrf for payment of duty is the invoice tSStﬂﬁd"~1}§ mzzuaufacturer at the time ofsclearajicettéf may be inputs used in the metﬁzxfacmretttof product. According to the respegtgitient caee" since the appellant is unable documents in support of his net--~.e:ntitiet1:f' relief since the appel}a;1't'*'11$te"j5teeei3:ed tiepmg. dealers and depots and censi3geme}et':':'a;ﬁe;;1:té*,.e._:in the absence of productien at such inveie_e$,,V is ineligible to the deemed ctectiit. ' «._19.'- ' zﬁtﬁsxtever, "it""i§ contended en behalf of the appellant tflfieiy payment of éuty an ad--~va}erem basis was cm the proéuctiee capacity of the unit fer the relevmzstx 'pe1*is3d in question, it is not necessary to mandate A ~11' " ttgettproducﬁon of such documents. it is for that teases that ' the clause 4 said netifeation and circulsar insisting en. the u pzoduetien. at' such; inveieee is ehaﬁeﬁged in this case. The 5*:

457

..,_/'*7 J relevant chause in ﬂier Noﬁﬁcaﬁon and circulagj. 31.3.2000 inipugned in the instant case mad as A' tno BE PUBLISHED IN PART 11: j1.S'z;1;f4s12:}:;'3'*{a;1S;* tgj] or ms GAZEYTE 012 INDIA, ;;xTRA(3g1§;NAR}%,V QAVTEH 1' 3183? MARCH, 2000 11, i922.1%AKA) QEBIA ' "

mmsmy o_mr1NAn:cE % {$EPARf§£E?Y'F .<:FjR:;z(r:N§zz;;_.


 :,3§v'e:--;:2  313: March, 2000
' ~ '    11 Chaitra, 1922 (Salsa)

. - - ' -   "Z:._ .'

" * A. ;3\_'(). f20:?(3€ei1i_i'd§ Exci$e (NT) _ an _sv at 'I 1% _ 54, %'¥Lé}i:2"{.V"._~'I*<:«:.;;"'s:./i:§ :'1rsb' of "£3153 imtzf1'a1t£ons shall apply to only E::;$z;éi.'ssv~--s,9§1ic}t have been received directly by {he V' 3 1 cf the ﬁnal pmcluds from the factory of « of the said inputs Lififlél' the cover of " .. ékigoioe declaring that the appmpriate duty of excise been paid! 9:: such Inputs wider' the pnguésians Qf 9é Sectéen 3A of the saidAc=1.

3')

9.:

Circular' No. 522[2000 P.N0, 13.4/' 5/2000-THU Gavemmem of India Ministry ofFinarwe . V __ Deparlmeni ofkevenue ' . M at»: at-.-;r"#'

4. It has also been decided tliat C{fl3i2*s;VA'?7_ci*:=.;i£r:}:§£1;y.'E9: allowed in respect of of At':1g')uI iii.f£.f'.t'.?Ar'5fi;2'.!4§'§VVVl-5;}l£'€¥}I are Eying with the re»-mII£:1'g{ pr i:£du:$ff:3rzﬁ1:':m:wne unifs as on 15' Credit shall be aliowed only o:zA..$:i£_2s?;. 'ssforrirs which is Gluié» The rewralling or' wzits may be advised that urtiéésxéfiie dacurnents are avaiiable with ~ 1'§':t§'::1,x ihé credii would not be admfssfbfe. Any A " » <:::f§iif«§}}}*a;:gZg taken; would meet with the consequences A ;;';%e§§criIs4e;§:?' :;:u1e:~ the CEIWAT rules. 2€}.*-..__ answering the questions raised in this Writ tlﬁé approach ﬁf thﬁ C-1Z')"£1i't in the matter of dmidiug {féjiistiiixtional validity ef the ﬁﬂﬂai pmvisima has in he Mgégpt in mind. _ ,.~.'3'} KL.

21. At the outset it has to be observed that every piece of legislation, plenary or delegated has in pass the 't¢; st: c§f Article 14. In the case. of Indian Express _ mombq) Private Limited Vs. Union of Juan-.--- :5; "

AIR 1986 sc 515 it has been held 'i;]_1-at: T 1' legislation does not carry the samf; degii':-§' hf is eﬁjoyecl by a statute passed"vB"5;..V'a Sub-ordigate legislation of the grounds on which plengiyf' éjiesﬂoned. in addition, it be gguund that clues not it is made 01' it is "ﬁr that it is unreasonable.

Similar is me _viéw in xmdays Distilleries _ Lsnut;-;¢i &- othérs. of Kcmmtaka (1996) 10 sec 'T7_EV:s§AeA«fIz"3.{ii:i~«,.t_'I1a.£'k Judgments in the context of deciding the iegislation under Article 14 of the V . Con§§i:%*::13:i§5n~ Kathi naming Rmuaf: 79. mm of W reported in Am 1952 so 123, am Krishna ngamia Vs. Justice remxoatamr mpoma in AIR 1953 so 'T ~ -558 and z>.vq;rmezu Mudaliar vs. Tim speeial cazzeetor " V for Land Aaquisttion & Another rep»:-mt! in AIR 1965 .% 101 7.

22. in the case of R.G.Ga.rg Vs. Union of India reported in (1931; 4 sec 575, it has been4";sta£§d'%j"%tixa~:.V" A- eca11o111ic statutes shauld be vieweii' u u than laws toucmng the civil rights. 311::

there camaot be any sn"aight?jz§:ék:t fciranlﬂa Ai¥£§v3--*.. pf; tax. 2 V L' While iiezaiing with CO§1§'.titUt%Q.I}Ta:3'..Véiu!?'1it_§.7 économm statute, the court muéf' that legislation is directﬁd to p11}Bieﬁ3L§, mechanism is highly cannot be tmateci 1ight1y. _ af AP 85 Others vs. in 2008 AIR sew .1826, it has beféu. are two possilitole Views, (me majLf'in"gL..ﬂ1e.V céxiétituticnal and the other making it 2;1_ﬁ{:aﬁn§§ihitiQna1, former View must always be piﬁerrad, A "' .a'3__ih }:~ imzalidatr: a statute lightly but 01113: when tlitzre are' gfave re.-asons to (10 so gtiarticlilarly in acanomic and AAathe§'v:%:gu}ato1y legislatioix jnclicisl mstraint has to be " VGhS;;§.i'V€(} by the mutt: as thﬁ csimrt does nut have eccmomic VA .. _ administrative fzxpertg.

23. In Associated Cement Companiw Limited Vs. Gavemymrzt of AJ' & Others, reported in AIR 2006 SC 928, it has bean heid ﬁmt a State enjoys a wixie discrvstixan in E5/_ .Jcr I'-J VL5 I the matter of taxation and €:11_§oys mare classifyhzg the objects to be taxed and the rate-_._ jéf"

in fact the State can validly pick and chqaaﬁ b object or transactimm for taxation ifhﬁi. 4i;is")f'., to attack under Article 14.,' _4sim;:a;1y, in s;¢geg%*%%A Bharaﬂ & Another Vs. _of tﬁthers, V reported (1999) 6 Ea';T~._h¢en stem that in examiaiﬂg mg aueggﬁaﬁg discriminatory tnezatment wh;at'i§V Ia3ok;°,d 1s.j::h}asm1og, but the real eﬁiect 'I€sL*'§::x':;$'i;§;.g»*£he aforesaid decisions in {Se answered.

24. _ it "I2.eca:s$$=.,1'§/A'Kf«;3i'~~--'iis to mfrte that during the period '~ 11L{:(:1':("§.['3_9§_7E];§1I",_i1 Seé'tic:a..3A was in eperation the excise ﬁuty was ¢:iete:rn1inati-0:1 of the annual capmity of j_ éiurixag the sa id' period the scheme of éiﬁdit was not in aperaticm. Consequent upon the " *§a¢:i:;;:m§wa1 of Section 3A of the Act \v.e.f., 1.4.2090 all m- mills and induction ﬁxrnace units became Iiahlrx ta "pay excise duty on adwaicrem basis. Uilditl' the chtumstances a mechanism was pmvkleci ta cnabhe the manufacmrmg units to avail the beneﬁt of CENVAT credit on ﬂie stack of inputs lying with them. as on 1.4.2300 atiei M25"

accc3rdi1:;.gly, it was dimcted that CENVAT credit aiiowed in. respect of salts {If input material lying with ﬂilﬁ re-telling mills and induction 53*' b on 1.4.2600. This was in fact a 'iihdagf CENVAT Scheme, ihough the.»i.n;§uts) Stggpcks w§:1%:.A' _' prior to 1.4.2000 during Ci'§NV';_§'?V':Scf:ftn3e was nest in oparatiou. 'periocfvVr'1Aui;i;:1g which Section 3A Wag LE1 :1 was not availabie to 'i£I4.__(§L§1€;sti0n, it does not mean in by such units, there ' §';)r the said purchase in order V €V"'..5.f:1VCDi:%V¢3.".':.'.» paid excise duty on the prcxjncts Vﬁifhough during the period when 35$ §va$ excisae duty was being paid by and indlzctiozn, ﬁlrnacse units on the basis §;$f t }i1e productimtx cagacity, that Wﬂuléi net mean dur'u1g§' §'l1va,i period the said manufactilring units were '' ta pmxzhase pmducts without any invoices Oi' Vﬁocumants. The basis azrf payment of $5-ECi§f:: duty dmting the uaperati-an of Sect§-an 3A i.e., can annual j3I't)('1"l1CtiQi1 capacity wait wszwuid {mt haw imitﬂied that it ceukl have purchased ijlgyuts Withmlt any dﬂcilﬁiﬁﬂtﬁ.

253. In order ti) hava the beﬁeﬂt of CENVAT credit wherein a set aﬁ' is given to tax paid on inputs as WEI} as tax pakl on previeus purchases, the requisite dirxmments to aVa'i,_1 7t.l1£:

CENVAT credit must be pmduced by the final product as per Rule 7 of CENVAT CredﬁRiilgs; ::I:i'_ﬂ3ét*«: _¢ tlite manufacturer of ﬁnal j3i'1)€l11CtS i'0I; Cmdit has hi') maintain §.mope:;, Vaco0u§1."£:s:,'A' iir;r<5ri--t£5ry '-- crf inputs and capital goods anii"L«igi"%snch regarditlg the value of ._pe1'${:ij:i"f:ﬁ1n whom the inputs or capital 7be¢:fi'-- has to be 1*ecord§:#cI."'"'i11- allowed ("Jail be utilized' ' far pay§ir.%¢£1t_ai' on any ﬁnai product or any a.::uou;1t *tQ credit taken an inputs if such < h1p"c%s 1fEiII101fE€l..;é"i..;"fz'i1C11 D1' aﬁer being partially pmeessed 'aﬁj equal to the CENVAT credit taken can capital goods are removed as such. In faet is allowed only when the inguts on which the x V' .d11'tit:-és exciae or additinnal duty of euﬁtoms has been paid"

é;:1: é{1i<.":h rats or equirvalcnt ts: such amount as may be kpaciﬁed in the nctiﬁcation and aliﬁws CENVAT credit of 51101:: duty dazenzrlaﬂi to have been paid in such manrier and subject ta S1112:-h conditions as speciﬁed. Thcref-ma, the i}}3i1'i1fE--2tCﬁ}JZ'E:1' has {:3 pi*0€m:::& the iﬁveices/cioeiiménts x '_,,.:/ a 3&3' shawing payment of duty issued at the time of availment of CENVAT Credit and the same is 3, maziidatary requirement as it is thﬁ basic proof of payment of duty evidencecl the invoice which is issued by the manufacturer at C}.&8}.'aﬁC& of the goods. Thenefom, if the ﬂblii Ti) pmducé the duty paying Ba' x e11tjt1ati to avail the beneﬁt of ._ pm"v::ha$e$ have been. made a At.I1€iEl;1fS5'.:\'31V§Ai.l_;'1§."igf1"VI:]J.€£}11" V L' agent Hence in the aibsencggf? A" 'doéz1;a1e1its' up ;x§voix.*cs in support of CENVAT the said scheme cannot be givv3n.*~ Undgzf 'ti1t: R&cii*c71.i:1_1stVa11g:Vé$ the issuance of ;1otiiic;-éztio;1' aﬁff tiatcd 31.3.2000 co11taini11g ﬂm <":1a11$;:": 11é"gaajrt1i;1§"§:jf;)d11Ctio;1 cf the cImu.n1m"3ts far ava3§3:§nug?'~€ENVAT. :§:Hreé f.t cammt ht: held to ba arbitrary or .A 2'&3._ " ?.'{vv'i:*.:::i'x:f::>§_e," i:I1e eantention of the appellant that claims 4 iii' No.29} 2000 operatas as a rezstrictima izamiot he aceqéfiﬂd. Merety because rimmed cmdit was given in A V' of copper anti o1:!:u=;r products and norm ijf the 1 'J§,()ﬂﬁ{f:3ﬁGI1 with mgaxd ta: thﬁ said products inlpostd any 'COI'.lﬁiﬁi3I1 that credit can bf: availed only if inputs are prmsumd ifli.1"f:C'§1'§I' from the manufacturer or a c':o11§iti011 __. _..

11t:quiri11g the praductioﬁ of any duty paying documéilts was insisted upon also cam)-at be accepted, Since k¢e.9mg~.._in mind the pﬁculiar Iiatllfﬂ of the steel inclustry, on the production of duty paying d(:)§f¥1I31€l]l'.S"f€Zlli'3lf¢¢i.ll:l1*l:g " = CENVAT credit has been made. Fi}rt11:=.:rLtl1é§ Vtﬁatll-Ill lt;:'i;el matiﬁcation issueé with xtgargl texiillir; ; conditions similar t0 clause _xlimpug1l1i=::1¢_uA these writ appeals lmve not been ;__;ii*c*11tL.;$:1e;clvl's3$:>IWQuld make the notiﬁcation and the ﬂue pnesent case (1691 with stcﬁi :§31§.l'un..c1§l1stitutiG11a}. Each pmc1V, czi" W"¢"1:i"}.(:Zl;L: iiiilusﬁy fc:+fm'a-- Class by thﬁmselvas and a Ccsﬁlpaséic-'.3 €31" tl1€::'v"zz2fi;=i«)i1*s;_ fszfoducts carinot be made: fer '£116. pizirpose (ii 14.' A _ "

2?.» ' l"i"'}1{: f121*t"i1E:;9éo11ténﬁ13n that nlerely béctause during the 'V geeilflﬁfl o_l§é::aﬁ0n of Saetioil SA tlm excise cluty was biting pxnductiarl capacity would not aiitamaltieallyllmataa that no cluty paying ﬁomzments with igegarxil iqfthct inputs wmxld be available with the appellant or rﬁétlzer similarly sitirxated ﬁlaﬂﬂfﬂetﬂiﬁf. it "B maiy the V' Efasis of payment of excise duty that wag altamd during the pfmiad 'Whﬁﬁ Smtztimii 3A was in c;«peratim1 i.e., on ammal §}£'0€:li.':Cﬂ0ﬁ capacity and aftﬁr 1.4.2062 01106: a the ..»>-"' CENVAT credit scheme has revived and the basis is 011 the actual pmduetieil and is: orcier '£0 avail the CISNVAT credit scheme, the proclueticm of the documents or invoieee fer having paid riuty particzliarly with regard to the smke'..en 1.4.2000 is a zleeessary requirement.

28. For the aforesaid reasoue We uphold ' vaiidity of clause 4 of the 11ot1";"iee.'£'ii3i1¢' N0. eimular bearirzg No.i':'22/ 2OOOVdateri' pain': No.2 is answered agairiaafthe w*rit appeal is disposed ofie. the '£*£=:_1'::11s.&'« Sd/-

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