Bengaluru: The Central GST (CGST) and excise duty on tobacco and products derived from tobacco may be levied by the Union government, ruled the Karnataka High Court.
Several petitions from tobacco manufacturers who had disputed the same were rejected.
The imposition of excise taxes on tobacco and tobacco products is a matter of public policy, and this court would not interfere with it in the exercise of its writ jurisdiction. In a recent judgement, Justice M. I. Arun ruled that the CGST “itself contemplates the levy of excise duty upon tobacco and tobacco products in addition to their being taxed under the provisions of CGST.”
Ghodawat Packers LLP, H I Tamboli and Sons, Rajnandini Foods Pvt. Ltd., Balajee Pouches, Ghodawat Foods International Limited, and Ghodawat Industries India Private Limited filed petitions against the Ministry of Finance, the Union of India, and the Joint Commissioner of CGST and Central Excise. The petitions were heard by the HC’s Dharawad bench.
An order imposing excise tax and National Calamity Contingent Duty (NCCD) on tobacco products manufactured and sold in the Belagavi jurisdiction was issued by the Joint Commissioner on March 25, 2021.
Tobacco goods were taxed under the Central Excise Act read with the Central Excise Tariff Act before the Central Goods and Services (GST) Act of 2017. Except for the items listed in the Union List of the Seventh Schedule of the Constitution, the Central Excise Act was repealed. Additionally, the Central Excise Tariff Act was repealed.
The HC said that despite the Excise Act being repealed, Entry 84 of the Seventh Schedule of the Constitution added tobacco and tobacco products. ”Thus, apart from levy of taxes under the provisions of CGST Act, 2017, excise duty can be levied on tobacco and tobacco products under the Central Excise Act, 1944.” The HC remarked that Section 136 of the Finance Act, 2001 contemplates the imposition of such a duty on the NCCD.
“NCCD is a surcharge and a type of excise duty which can be levied independently of the excise duty as contemplated under the provisions of Fourth Schedule to the Central Excise Act, 1944. Thus, levy of NCCD in the absence of levy of excise duty cannot be considered as bad in law,” the HC said.
Dismissing the petitions, the HC clarified, “For better clarification, reference is made out in the Central Excise Act. Repealing of Central Excise Act does not absolve the petitioners paying NCCD as determined under the Seventh Schedule.”