- In the case of M/s V.S.Products vs. Union of India, the Hon’ble Karnataka HC has upheld the notification dated July 6,2019 issued by the GOI by which central excise duty has been levied on tobacco and tobacco products.
- The petitioners in this case had sought for setting aside the aforesaid notification and for a declaration that the Repeal and Saving clause as contained in section 174 of the Central Goods and Services Act in so far as it seeks to save the operation of the Central Excise Act to be unconstitutional.
- The petitioner also sought for a declaration that section 136 of the Finance Act under which there is levy and collection of the National Calamity Contingent Duty as unconstitutional.
- It was argued that Article 246A is a sui generis power exhaustive of all taxes and on all facets of supply of goods including tobacco and its products. It overrides the taxing power of the legislature conferred by article 246 in view of the non-obstante clause in article 246.
- The Court noted that the effect of the introduction of Article 246A is the conferment of the power of simultaneous levy of Goods and Services Tax. The use of the word ‘notwithstanding’ does not have the effect of abrogation of the power mentioned under Article 246.
- The Court also observed that the words ‘notwithstanding anything contained in Article 246’ merely clarifies that in spite of the power under Article 246, the power under Article 246A could be exercised and the former would not act as an impediment to the operation of the latter.
- The Court also observed that the Legislature enjoys a wide array of powers to decide on the various methods of revenue generation.
- The Court also rejected the contention of the petitioners that surcharge cannot be levied under Article 271 as regards goods included in Article 246A as a plain reading of Article 271 provides that a surcharge can be levied at any time to increase taxes. The Court also noted that the surcharge being levied by way of the Finance Act has nothing to do with the surcharge on GST.
- The Court also held that the levy of excise duty and NCCD is not violative of Article 14. It was also observed that the choice of goods cannot, in themselves, be a ground for judicial review. Something more has to be brought on record for the same, for instance, hostile discrimination or singling out a particlar category of goods.
- The Court also observed that the choice of the category of goods, like in the present case, can be to discourage consumption, and is hence, non-arbitrary.
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