GTC INDUSTRIES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The first petitioner is a company incorporated under the Companies Act, 1956 having its registered office within the jurisdiction of this Court. The second petitioner is the Secretary of the first petitioner company which is engaged in the manufacture and marketing of cigarettes of various kinds and packed in different quantities. The petition states that the petitioners follow a uniform practice and pattern in selling and marketing the cigarettes. This pattern consists of the supply of the cigarettes to the wholesale buyers throughout the country who in turn sell them to the retailers, the latter coming in contact with the ultimate consumers. On the packets containing the cigarettes there is always market a price which is mentioned as the maximum retail price excluding local taxes, if any. The petition describes in some details the distribution system under which the petitioner's products are sold. In paragraph 8 of the petition it has been specifically stated that under the rules made under the Standard of Weights and Measures Act, 1976, the rules being called the Standard of Weights and Measures (Packed Commodities) Rules, 1977, manufacturers who pack goods in package intended for retail sale are required to mention on each package the maximum sale price of the retail packet. In accordance with the requirement of the said Rules, the packets of cigarettes sold by the petitioners also are stamped with the maximum sale price.

(2.) Cigarettes are subjected to excise duty. The excise duty is leviable in the cigarettes under the Central Excises and Salt Act, 1944, hereinafter referred to as the "Excise Act". In addition, under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, additional duties of exercise are leviable on such cigarettes. In theory, the excise duty may be either on ad valorem basis, that is, the duty being related to the value of the product, or the duty may be specific in the sense a given excise duty is levied upon the quantity of the product. Section 3(1) of the Excise Act provides for the levy and collection of duties of excise on all excisable goods in such manner as may be prescribed and at the rates set forth in the First Schedule. Subsequently this Schedule has been deleted from the Excise Act of 1944 and has been annexed as Schedule to the Central Excise Tariff Act, 1985. Provision has been made for this change in Section 3 of the Excise Act as amended in the year 1985. For the sake of convenience, the rates of duty formerly mentioned in the First Schedule to the Excise Act of 1944 and now in the schedule to the Central Excise Tariff Act, 1985 can be referred to as the statutory rates. Amendment consequent to the introduction of the Schedule to the Central Excise Tariff Act, 1985 has come into effect from 1st of February 1986.

(3.) Sub-section (2) of Section 3 of the Excise Act provides that the Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the duties, tariff values of any articles enumerated, either specifically or under general headings, in the Schedule to the Central Excise Tariff Act, 1985 as chargeable with duty ad valorem. In other words, by issuing a notification the Central Government can fix a valuation for the purpose of levying ad valorem duty of items mentioned in the Schedule. The tariff values so fixed by the Government notification may be fixed for different classes or descriptions of the same excisable goods of for excisable goods of the same class or description produced or manufactured by different classes of producers or manufacturers or sold to different classes of buyers. Wide discretion is thus left to the Government for fixing tariff values under sub-section (3) of Section 3 of the Excise Act.