RANSON INDUSTRIES Vs. UNION OF INDIA

JUDGEMENT

(1.) These four appeals are against a common judgement and order of the learned Single Judge dated 30th January, 1999 in four writ petitions by which the learned Single Judge dismissed the writ petitions and rejected the challenge to the validity of Rule 7A of the Central Excise Rules, 1944 ("Rules"). These appeals are, therefore, taken up together for final hearing and disposal. As the facts of all the four cases are identical, we would refer to the facts of only one of the appeals {LPA No.17/99 (Mangal Sain Verma )}.

(2.) The appellant is engaged, inter alia, in the business of manufacture and production of India-made foreign liquor and spirit. For use as a raw material in the manufacture of Indian made foreign liquor and spirit, the appellant purchases molasses produced in khandsari sugar factory . Excise duty is leviable on molasses under the Central Excise Act, 1944 ("Act") at the rate of Rs.500/- per tonne (Entry 17.03 of Tariff Act, 1985). Till Ist March 1997, molasses produced in Khandsari sugar factory were exempt from payment of excise duty. By Central Excise (Amendment) Rules 1997 (Amendment Rules), framed by the Central Government in exercise of powers conferred under section 37 of the Act, 1944, certain amendments were made in certain rules of the Central Excise Rules relevant for levy and collection of excise duty on molasses. The following proviso was added to rule 7 of the Rules, which provides for recovery of duty : "Provided that nothing contained in this rule shall apply to molasses produced in a khandsari sugar factory". A new rule, namely, rule 7A was inserted to provide for recovery of excise duty on molasses produced by khandsari sugar factories. Consequential amendments were also made in rule 9A. By insertion of rule 9C, provision was made for recovery of duty on molasses produced by a khandsari sugar factory from a person who procures such molasses. In other words, the procurer of molasses was made responsible for the payment of duty as against the manufacturer of molasses.

(3.) The appellant and three other procurers of molasses challenged the validity of the above rule before this Court by filing writ petitions on the ground that it provides for recovery of duty from persons like the appellants who are not manufacturers .The case of the appellants was that what was charged from them under rule 7A of the Rules was, in effect, not excise duty but a tax on purchase of molasses which is not contemplated by entry 84 list I of the Seventh Schedule to the Constitution of India. The learned Single Judge rejected the contention of the appellants and held that the excise duty collected under rule 7A was a duty on the manufacture of the molasses produced by khandsari sugar factory and not tax on purchases as contended by the appellants. The learned Judge observed that the mere fact that it was collected from the appellants who were not manufacturers but purchasers of molasses would not change the character of the excise duty. The learned Judge held that the taxing event was "manufacture of molasses" and the fact that it was collected from a person who was himself not a manufacture would not invalidate the levy. In view of the above, the learned Single Judge dismissed the writ petitions. Aggrieved by the judgement and order of the learned Single Judge, the appellants are before us by way of the present appeals.