Facts of the Case

M/S V.S. Products, a proprietary firm manufacturing tobacco products, was registered under the Central Excise Registration Rules, 2002 and, after GST commenced, under the CGST Rules, 2017. By Notification No.2/2019 dated 06.07.2019, issued under Section 5A(1) of the Central Excise Act, 1944, Central Excise Duty was levied on tobacco products. The appellant challenged this notification, contending that the savings clause in Section 174 of the Central Goods and Services Tax Act, 2017 and Section 136 of the Finance Act, 2001 (National Calamity Contingent Duty, "NCCD") were unconstitutional, or alternatively that NCCD stood impliedly repealed from 01.07.2017, and sought refund of NCCD collected thereafter. A Single Judge dismissed the writ petition on 04.01.2022. After an interim order restraining collection lapsed, a show-cause notice dated 24.12.2021 demanded Rs.98,75,995 as basic duty and Rs.47,73,53,435 as NCCD; the appellant deposited Rs.48,67,36,347 under protest and filed this intra-court appeal.

Issues Involved

  1. Whether, after Article 246A, the Union can simultaneously levy Central Excise Duty/NCCD under Article 246 and GST under Article 246A on the same goods.
  2. Whether such simultaneous levy on tobacco products amounts to impermissible double taxation.
  3. Whether Section 174, CGST Act, 2017 and Section 136, Finance Act, 2001 are unconstitutional or discriminatory under Article 14.

Petitioner's/Appellant's Arguments

  • The 101st Amendment's object was to subsume indirect taxes like Central Excise Duty into a single GST, and Article 246A is exhaustive of the field for goods now covered by GST.
  • Powers under Articles 246 and 246A are mutually exclusive; the non-obstante clause in Article 246A overrides Article 246, so both cannot apply simultaneously to tobacco products.
  • "Supply," the GST taxable event, subsumes the erstwhile taxable event of "manufacture," so no old-regime indirect tax can survive.
  • Continuing excise duty and NCCD on tobacco alone, when nearly all other goods moved wholly to GST, is hostile discrimination violating Article 14.
  • Article 271 excludes surcharge in relation to GST under Article 246A.

Respondent's Arguments

  • No constitutional bar exists on simultaneous levy of excise duty, NCCD and GST on tobacco products; Articles 246 and 246A are independent and can co-exist.
  • Taxable events differ — manufacture for excise, supply for GST — so there is no impermissible overlap.
  • Levy and quantum of tax are legislative policy matters; courts do not interfere absent constitutional infirmity.
  • Even assuming double taxation, it is not unconstitutional where imposed by valid legislation, not mere executive action.

Court Order/Findings

  • The Division Bench affirmed the Single Judge: Article 246A confers power for simultaneous levy without abrogating Article 246; the two sources of power, though distinct, can be exercised simultaneously.
  • "Supply" and "manufacture" are distinct legal aspects; taxing different aspects of the same subject under different laws is not impermissible double taxation.
  • NCCD is an independent levy in the nature of additional excise duty, unaffected by any GST exemption notification.
  • On Article 14, the appellant had not pleaded discrimination in the original writ petition, so it could not be raised for the first time in appeal; in any event, continued dual taxation of tobacco was a policy matter within legislative competence, not manifestly arbitrary.
  • The appeal was dismissed, upholding the levy of excise duty and NCCD.

Important Clarification

  • Articles 246 and 246A operate on independent legislative fields and can be invoked simultaneously; GST does not, by itself, oust the Union's power to levy excise duty on goods like tobacco outside full GST subsumption.
  • Double taxation of the same transaction under two different legal aspects (manufacture and supply) is not per se unconstitutional when backed by valid legislation.
  • An Article 14 manifest-arbitrariness challenge must be specifically pleaded with particulars in the writ petition; it cannot be raised for the first time in appeal.

Sections Involved

  • Article 246 and Article 246A, Constitution of India — legislative competence for excise duty and GST respectively.
  • Section 5A(1), Central Excise Act, 1944 — power to issue levy/exemption notifications for excise duty.
  • Section 174, Central Goods and Services Tax Act, 2017 — savings clause preserving the 1944 Act for specified goods including tobacco.
  • Section 136, Finance Act, 2001 — levy and collection of National Calamity Contingent Duty.
  • Article 14, Constitution of India — equality and non-discrimination challenge.

Decision – In Favour of

The Division Bench dismissed the appeal, upholding the simultaneous levy of Central Excise Duty, NCCD and GST on tobacco products, and rejecting the constitutional challenge in its entirety. The decision is in favour of the Department (Union of India).

Related Case Laws

No related case laws are available on this site at present.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: W.A. No.119 of 2022 in W.P. No.52371 of 2019
  • Coram: Hon'ble Mr. Justice Alok Aradhe and Hon'ble Mr. Justice S. Vishwajith Shetty
  • Date of Judgment: 20 April 2022

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