Case Note & Summary
The appeal was filed by the Commissioner of Central Excise, Mumbai against the order of the Customs, Excise & Service Tax Appellate Tribunal (West Zonal Bench, Mumbai) dated 5th March, 2008. The Tribunal had held that Notification No.42/98 CE (NT) dated 10.12.1998 was ultra vires the provisions of the Central Excise Act, 1944, on the ground that the notification could not have been issued without previous publication as required under the proviso to Section 3A of the Act. The respondent, M/s Valson Dyeing Bleaching & Printing Works, was a hot air stenter independent processor engaged in the processing of textile fabrics. The Central Government, with a view to levy excise duty on the basis of capacity of production, introduced Section 3A in the Central Excise Act, 1944. Under Section 3A(2), the Central Government was empowered to notify the capacity of production for any factory. The proviso to Section 3A(2) required that before issuing any notification under that sub-section, the Central Government should publish the rules in the Official Gazette. The Tribunal held that since the notification was not preceded by previous publication of rules, it was ultra vires. The High Court, however, reversed this finding. The court examined the scheme of Section 3A and noted that the notification in question was issued under the proviso to Section 3A(2) and not under the main sub-section. The proviso itself contained a requirement of previous publication of rules, but the notification was not a rule; it was a notification issued under the proviso. The court held that the requirement of previous publication applied only to the rules, not to the notification. Therefore, the notification was valid and intra vires. The court also noted that the respondent had not challenged the validity of the notification before the Tribunal and had only argued that the abatement was not applicable. The court allowed the appeal, set aside the Tribunal's order, and restored the order of the Commissioner confirming the demand of duty.
Headnote
A) Central Excise - Validity of Notification - Section 3A Central Excise Act, 1944 - Notification No.42/98 CE (NT) - The Tribunal held the notification ultra vires for lack of previous publication. The High Court reversed, holding that the notification was issued under the proviso to Section 3A(2) and was valid as it was not a rule requiring previous publication. The court held that the notification prescribing abatement for deemed production was intra vires the Act. (Paras 1-10) B) Central Excise - Deemed Production - Section 3A Central Excise Act, 1944 - Abatement Notification - The dispute pertained to whether the respondent, a hot air stenter independent processor, was liable to pay excise duty on deemed production capacity with abatement as per Notification No.42/98. The court held that the notification validly prescribed the manner of determining deemed production and the abatement was permissible. (Paras 2-8)
Issue of Consideration
Whether the Tribunal erred in holding that Notification No.42/98 CE (NT) dated 10.12.1998 was ultra vires the provisions of Central Excise Act, 1944, since as contemplated under the statutory proviso in Section 3A of the Central Excise Act, 1944, the notification could not have been issued without the previous publication of the rules.
Final Decision
Appeal allowed. Tribunal order set aside. Notification No.42/98 CE (NT) held valid and intra vires. Order of Commissioner confirming demand of duty restored.
Law Points
- Notification No.42/98 CE (NT) is intra vires Section 3A of Central Excise Act
- 1944
- Tribunal cannot strike down notification as ultra vires without considering statutory scheme
- Abatement notification validly prescribes deemed production for hot air stenter independent processors
