Karnataka High Court Upholds Levy Of Excise Duty & Calamity Contingent Duty On Tobacco & Its Products

A Single judge bench of Justice M.I.Arun dismissed a batch of petitions filed questioning the imposition of Excise Duty and National Calamity Contingent Duty (NCCD) on the tobacco products being manufactured and sold.

The bench noted that CGST Act, 2017 contemplates levy of Excise Duty in respect of goods included in entry 84 of the Union List of Seventh Schedule of the Constitution of India.

It then said,

"Levy of excise duty on tobacco and tobacco products is a matter of public policy and this Court in exercise of writ jurisdiction would not interfere with the same. The CGST itself contemplates levy of excise duty upon tobacco and tobacco products apart from them being taxed under the provisions of CGST. There is no error in the same. Thus, the respondents are entitled to levy CGST as well as excise duty on tobacco and tobacco products."

As regards the question whether NCCD can be leviable under Section 136 of the Finance Act, 2001 when excise duty is exempted, the bench said,

"Section 136 of the Finance Act, 2001, contemplates levying and collecting NCCD, which is considered as a surcharge, a duty of excise. Thus NCCD is not contemplated in Section 136 as a levy on the excise duty levied under the Central Excise Act, but a separate duty being levied on the value of the goods manufactured or produced and it is a type of excise duty."

The petitioners contended that determination of NCCD was being done in accordance with the Seventh Schedule to the Finance Act, 2001. It was argued that the Central Excise Tariff Act having been repealed, no effect could have been given to the Seventh Schedule to the Finance Act, 2001, before it was duly amended.

Rejecting this contention, the bench said,

"Repealing of the Central Excise Act does not absolve the petitioners paying NCCD as determined under the Seventh Schedule. Thus, NCCD is a surcharge and a type of excise duty which can be levied independently of the excise duty as contemplated under the provisions of Fourth schedule to the Central Excise Act, 1944. Thus levy of NCCD in the absence of levy of excise duty cannot be considered as bad in law."

Case Title: GHODAWAT PACKERS LLP v. UNION OF INDIA

Case No: W.P. NO.145107/2020

Citation: 2022 LiveLaw (Kar) 388

Date of Order: 21ST DAY OF SEPTEMBER, 2022

Appearance: SHIVADASS, SENIOR COUNSEL FOR GANGADHAR J.M., ADVOCATE, PRASHANT F.GOUDAR, ADVOCATE for petitioners; M.B. KANAVI, CGSC FOR R1; GIRISH S.HULMANI, ADVOCATE FOR R2

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