In the Apex Court Yesterday
YESTERDAY the Supreme Court delivered three important judgements on Central Excise.
Excise Duty beyond death:
The Supreme Court started its judgement with these words, "Nothing is certain except death and taxes." To tax the dead is a contradiction in terms. Tax laws are made by the living to tax the living. What survives the dead person is what is left behind in the form of such person's property."
The question to be decided by the Supreme Court was whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead.
The Supreme Court noted there is in fact no separate machinery provided by the Central Excises and Salt Act to proceed against a dead person when it comes to assessing him to tax under the Act.
The Supreme Court observed, "Apart from the fact that there is nothing about dead persons in Section 11, Section 11 is limited only to recovery of sums that are due to the Government. The very opening words in Section 11 show that duty and other sums must first be payable to the Central Government under the Act or the rules. If such sums are not "payable" then the provisions of the Section do not get attracted at all. We have seen that the Act contains no machinery provisions for proceeding against a dead person's legal heirs, such as are contained in the Income Tax Act. Obviously, therefore, duty and other sums do not become "payable" without such machinery provisions. Further, Section 11 deals with modes of recovery of tax payable and does not deal with the subject matter at hand - namely machinery provisions for assessment in the hands of the estate of a dead person and, therefore, does not have much bearing on the matter in issue in the present case."
The Court held that there is no provision which empowers the authorities to recover due from a deceased assessee by proceeding against his legal heirs. The way section 11 and 11A are worded, it is amply clear, the legislature has consciously kept away the legal heirs from answering to liabilities under the Act.
The Supreme Court further observed, "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency."
The Supreme Court noted that the Income Tax Act also did not have such provisions, but they made their amendments in 1933. Maybe there will be an amendment to catch the survivor in indirect taxes also and will the GST Act have such a provision?
Iron and steel obtained by breaking up of ships – two different notifications for two similar assessees not correct:
Two notifications were issued on 27.03.1987 exempting iron and steel obtained from breaking up of ships.
By the first Notification No.102/87-CE, if the customs duty leviable on the import of ship for the purpose of breaking is paid at the rate of Rs. 1,035/- per LDT along with additional duty leviable thereon under Section 3 of the Customs Tariff Act, the excise duty payable is at the rate of Rs.365/- per tonne, exempting the remainder as specified in the Schedule.
On the other hand, as per Notification No.103/87-CE, if the customs duty has been paid at the rate of Rs.1400/- per LDT, the scrap obtained from breaking of such ships is exempted from the entire excise duty.
This was challenged by the assessee as arbitrary, artificial and has no nexus with the object that is sought to be achieved. When customs duty is payable under either of the two methods, it is not understood why exemption is granted only to one set of persons paying customs duty in a particular method of assessment.
The Supreme Court observed,
1. The State undoubtedly enjoys greater latitude in the matter of a taxing statute. It may impose a tax on a class of people, whereas it may not do so in respect of the other class.
2. A taxing statute, however, as is well known, is not beyond the pale of challenge under Article 14 of the Constitution of India.
3. It is, thus, beyond any pale of doubt that the justiciability of particular Notification can be tested on the touchstone of Article 14 of the Constitution.
5. Article 14, which is treated as basic feature of the Constitution, ensures equality before the law or equal protection of laws.
6. Equal protection means the right to equal treatment in similar circumstances, both in the privileges conferred and in the liabilities imposed. Therefore, if the two persons or two sets of persons are similarly situated/placed, they have to be treated equally.
7. At the same time, the principle of equality does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position. It would mean that the State has the power to classify persons for legitimate purposes.
The Supreme Court was in favour of the assessee.
Manufacture - Concurrent finding of fact on manufacture by all three lower authorities accepted:
On a question whether a particular activity amounted to manufacture, the Supreme Court observed that the Adjudicating Authority, the Commissioner (Appeals) and the Tribunal held against the assessee. The appellant has lost before all the fora below who have concurrently held that the activity undertaken by the appellant amounts to 'manufacture'.
The Supreme Court concluded,
A finding of fact is arrived at by all the three Authorities that the activity undertaken by the appellant amounts to "manufacture" within the meaning of Section 2(f) of the Central Excise Act, 1944, since the end result of the process or activity resulted in new and different commercial product. We, thus, are of the opinion that on the basis of the aforesaid findings which are concurrent findings of all the Courts below, the correct legal principle has been applied.
We bring you all the three judgements today. Please see Breaking News.