M/S Bhuwalka Steel Industries Ltd & Anr. vs Union Of India & Ors

R.F. Nariman, J

1) The present reference arises from a judgment of the Division Bench of this Court reported as Bhuwalka Steel Industries Limited and Another vs.

Union of India and Others, (2017) 5 SCC 598. The question before the Court was set out as follows:-

“20. The validity of Rule 5 of the 1997 Rules is challenged both before the High Court and before us on two grounds:

That the Rule is ultra vires the authority conferred under Section 3-A of the Act; and

That the Rule is violative of Article 14 of the Constitution of India. Because the Rule creates two classes of manufacturers:-

(i) whose ACP is determined to be more than their actual production in the Financial Year 1996-97.

(ii) Whose ACP is determined to be less than their actual production for the Financial year 1996-97; and imposes an irrational tax burden on the

second of the above-mentioned two classes of manufacturers falling within the ambit of the 1997 Rules.â€​

2) This question has not been answered by the Division Bench. Instead, the Division Bench went into a completely different question, which was

posed as follows:-

“51. Whether an assessee who chooses once to pay duty in terms of Rule 96-ZP(3) can be compelled to pay duty calculated in accordance with

the said Rule for all times to come without any regard to the actual production is a question which requires examination.â€​

3) This question was then referred to a larger Bench as follows:-

“63. Therefore, we find it difficult to accept the submission of the respondent that the issue is covered by the judgments of this Court in Venus

Castings (2000) 4 SCC 206 and Supreme Steels (2001) 9 SCC 645. In our opinion, for the reasons mentioned above, these two judgments require a

further examination. Apart from that, these judgments did not deal with vires of Rule 96-ZP(3). However, in view of the fact that Supreme Steels is a

decision rendered by a Bench of three learned Judges, we deem it appropriate that the question of law be settled by a Bench of an appropriate

strength. We, therefore, direct the Registry to place the matter before Hon'ble the Chief Justice of India for further orders.â€​

4) Mrs. Nalini Chidambaram, learned Senior Advocate appearing on behalf of the appellant-assessee, states that she came to Court challenging the

vires of Rule 5 instead of which a completely different question has been referred to a larger Bench. She further submits that she is not, in any way,

challenging the fact that an assessee can be compelled to pay duty in terms of Rule 96-ZP(3) without regard to actual production which is laid down

Section 3A(4) of the Central Excise Act.

5) This being the case, we answer this reference by stating that the question posed before us did not arise at all on facts and the question which has

been referred is not something which the assessee disputes. Accordingly, the matter is sent back to a Division Bench to decide the questions stated in

para 20 of Bhuwalka Steel Industries Limited and Another (supra). The issues other than the issue raised in para 51 of the judgment in Bhuwalka

Steel Industries Limited and Another (supra) may also be decided in the other tagged matters by the Division Bench.

6) The appeals and the tagged matters be placed before a Division Bench of this Court.