R.C. TOBACCO PVT. LTD. AND ANR. versus UNION OF INDIA AND ANR.

Citation: [2005] SUPP. 3 S.C.R. 342 · Decided: 19-09-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed

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Judgment (excerpt)

A 
B 
c 
R.C. TOBACCO PVT. LTD. AND ANR. 
V. 
UNION OF INDIA AND ANR. 
SEPTEMBER 19, 2005 
[RUMA PAL AND TARUN CHATTERJEE, JJ.] 
Excise Law: 
Finance Act, 2003: Sei:tion 154 and Schedule IX. 
Excise duty-Notifications Nos. 32199 dated 8. 7.1999, 45199 dated 
31.12.1999 and 112001 dated 22.1.2001-Retrospective operation of-
Constitutionality-Exemption granted to cigarette manufacturers by the 
Notifications retrospectively rescinded/withdrawn-Validity of-Held: Factors 
D which are relevant to decide whether S. 154 is ex facie discriminatory, or so 
unreasonable or confiscatory that it violated Articles 14 and 19 of the 
Constitution, considered-Such/actors examined and retro~pective rescinding/ 
withdrawing of said exemption, not discriminatory-Constitutionality of S. 
154 upheld-Constitution of India, 1950, Arts. 14 and 19-Central Excise 
Act, 1944, S. 5-A. 
E 
Excise duty-Recovery of-Period of limitation-Held: The period of 
limitation specified in S. 154 is applicable and not the one provided under S. 
II-A of the Central Excise Act, 1944. 
Excise duty-Recovery of-Requirement of notice-Necessity of-Held: 
F Since notice of personal hearing was served on the petitioners, applicability 
of the principles of natural justice, not considered. 
Excise duty-Withdrawal of exemption-Recovery of duty-Raising of 
demand-Validity of-Held: The consequences of the withdrawal of exemption 
of excise duty including the recove1y of excise duties have been provided for 
G in S. 154 itself-Hence, retrospective withdrawal of exemption and recovery 
of arrears of excise duty, although operated harshly in some cases, by itself 
did not invalidate the demand. 
The petitioners manufactured cigarettes and almost all of them were 
H 
342 
R.C. TOBACCO PVT. LTD. v. U.0.1. 
343 
job workers for large tobacco companies. They set up their units under A 
agreements with the large tobacco companies and admittedly produced 
the cigarettes with the brand names of those companies. Under Notification 
Nos. 32/99 and 33/99 dated 8.7.1999, the petitioners were entitled to 
exemption from excise duty. The procedure envisaged for obtaining the 
exemption under both the Notifications was that the manufacturer would B 
have to pay the excise duty and subsequently claim refund from the excise 
authorities. Subsequently, by Notification No. 45/99 dated 31.12.1999 the 
excise exemption to cigarettes was withdrawn. However, the exemption 
was reintroduced by Notification No. 1/2000 dated 17.1.2000. The 
exemption was finally withdrawn by Notification No. 1.2001 dated 
22.1.2001. 
c 
A Single Judge of the High Court held that the petitioners were 
entitled to refund of excise duty on the cigarettes manufactured from the 
date of commercial production till the date the benefit was withdrawn by 
the Central Government in January 2001. A Division Bench affim1ed that 
decision. The Union of India had challenged the said decision before this D 
Court. 
Immediately after the decision of the Division Bench of the High 
Court, Section 154 of the Finance Act, 2003 was enacted by Parliament. 
The exemptions available to the manufacturers of cigarettes from 1999 
up to 27.1.2001 (except for a short period between 31.12.1999 and E 
17.1.2000 during which it was not available), was rescinded retrospectively. 
This meant that the excise duties already refunded to the petitioners would 
be liable to be recovered, no further refund would be made and the 
petitioners would be liable to pay the excise duties not paid when the 
exemption was in force i.e. between 8.7.1999 and 27.1.2001. 
p 
A second batch of writ petitions was filed by the petitioners before 
the High Court challenging Section 154 as being unconstitutional. These 
writ petitions were transferred to this Court and listed for hearing along 
with the appeals of the Central Government. 
G 
On behalf of the petitioners, it was contended that the 
unreasonableness in the retrospective operation of Section 154 was evident 
from the 'flip-flop' of the Central Government in issuing the notifications 
granting, then withdrawing, again granting, before finally withdrawing 
the benefit in respect of cigarettes in the short space of about a year and 
a half; that when the legislature violated promises and representations H 
344 
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R. 
A made by the Government, it was a facet of unreasonableness that must 
be taken into account in evaluating the constitutionality of the law under 
Article

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