# MIS. BHUWALKA STEEL INDUSTRIES LTD. & ANOIHER v. UNION OF INDIA & OTHERS - **Citation:** [2017] 2 S.C.R. 993 - **Court:** Supreme Court of India - **Decided:** 2017-03-24 - **Case number:** Civil Appeal No.7823 of2014 - **Bench:** J. Chelameswar, Abhay Manohar Sapre - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-bhuwalka-steel-industries-ltd-anoiher-v-union-of-india-others-31879 - **Pages:** 30 ## Headnote Central Excise Act, 1944 - s.3A - Purpose of inco11Jorailng s. 3A - Discussed. Central Excise Rules. 1944 - rr. 96ZP(3) and 96Z0(3) - Whether an assessee who chooses once to pay duty in terms of r. 96ZP(3) can be compelled to pay duty calculated in accordance with the said rule for all times to come without any regard to actual production - Department relied on Venus Castings and Supre~1e Steel case rendered by Supreme Court to stale that the assessee who makes a choice once to avail the scheme under r. 96ZP(3) cannot go beyond his choice - However, in both these cases, Supreme Court was dealing with 1: 96Z0(3) - In Venus Castings, a r~ference was made to r. 96ZP and it was observed that r. 96ZO and 1: 96ZP provide for procedure to be followed by the mamifacll/rer of ingots and billets and hot re-rolled products and the scheme envisaged tlv1t these provisions was identical - Held: There are broad similarities between these rules but they are not identical - The only similarity between r. 96Z0(3) and r. 96ZP(3) is that both the Rules seek to eliminate the benefit of the procedure u!s.3A(4) of the Act in cases of those assessees who choose to opt for levy and collection of excise duty in accordance with the sub-rules (3) which are exceptions to the general Rules of levy and collection of duties provided u/n: 96ZO and 96ZP - Therefore, it is difficult to accept the submission of the Department that the issue is covered by the judgments of t/:is Court rendered in Venus Castings and Supreme Steels - These two ;udgments require a ji1rther examination - Apart from that, these ;udgments did not deal with vires of r. 96ZP(3} - However. in view of the fact that Supreme Steels is a decision rendered by a Bench of three Judges, it is deemed appropriate that the question of law be settled by a Bench of an appropriate strength - Matter referred to larger bench - Hot re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - 1:5 - Central Excise Act, 1944 - 993 B c D E F G H 994 SUPREME COURT REPORTS [2017] 2 S.C.R. A s. 3A - Reference to larger bench. B c D E F G H Interpretation qf statutes: Legal fiction and presumption - Distinction between - Held: A fiction assumes somethilig which is known to be false, while presumption assumes something which may possibly be true. Legal fiction - Only sovereign legislative bodies can create legal fiction but not a subordinate /'!"' making body. Referring the matter to larger bench, the Court HELD: 1. Parliament from time to time took notice f!f the fact that some of the manufacturers/producers of excisable goods are evading duty by suppressing the information of the q11a•1tum of actual production/manufacture of goods undertaken by them. Therefore, Sectio113A was introduced which authorised a diff~rent mode of levy, assessment and collection of excise duty on notified goods. Under the Scheme of Section 3A, the need to constantly monitor the actual quantum of notified goods produced/ manufactured is obviated by declaring that the ACP of factory is deemed to be the annual production of the factory for the purpose of levy and collection of excise duty. [Para 24] [1010-B-C) 2. llot re-rolling Steel Mills Annual Capacity Determination Rules, 1997 prescribed the procedure by which the ACP is to be determined. Rule 3 prescribed a formula based 011 various factors mentioned therein for the determination of the ACP. The grievance of appellant is against Rule 5 which mandates that the ACP determined in accordance with Rule 3 be discarded i:t the circumstances mentioned under Ruic 5. Rule 5 stipulated that if the ACP determined in accordance with the preceding four Rules is less than the actual production of a particular assessee for the financial year 1996-1997, the authority determining the ACP is required to abandon the figure of ACP arrived at by employing the procedure contained in Rules 1 to 4 and adopt the actual production achieved by the assessce for the financial year 1_99697 to be the ACP of t ## Text _Characters 0–39,954 of 75,762. This is a partial read: ask again with offset=39954 for what follows._ [2017] 2 S.C.R. 993 MIS. BHUWALKA STEEL INDUSTRIES LTD. & ANO!HER A v. UNION OF IND!A & OTHERS (Civil Appeal No.7823 of2014) MARCH 24, 2017 [J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.] Central Excise Act, 1944 - s.3A - Purpose of inco11Jorailng s. 3A - Discussed. Central Excise Rules. 1944 - rr. 96ZP(3) and 96Z0(3) - Whether an assessee who chooses once to pay duty in terms of r. 96ZP(3) can be compelled to pay duty calculated in accordance with the said rule for all times to come without any regard to actual production - Department relied on Venus Castings and Supre~1e Steel case rendered by Supreme Court to stale that the assessee who makes a choice once to avail the scheme under r. 96ZP(3) cannot go beyond his choice - However, in both these cases, Supreme Court was dealing with 1: 96Z0(3) - In Venus Castings, a r~ference was made to r. 96ZP and it was observed that r. 96ZO and 1: 96ZP provide for procedure to be followed by the mamifacll/rer of ingots and billets and hot re-rolled products and the scheme envisaged tlv1t these provisions was identical - Held: There are broad similarities between these rules but they are not identical - The only similarity between r. 96Z0(3) and r. 96ZP(3) is that both the Rules seek to eliminate the benefit of the procedure u!s.3A(4) of the Act in cases of those assessees who choose to opt for levy and collection of excise duty in accordance with the sub-rules (3) which are exceptions to the general Rules of levy and collection of duties provided u/n: 96ZO and 96ZP - Therefore, it is difficult to accept the submission of the Department that the issue is covered by the judgments of t/:is Court rendered in Venus Castings and Supreme Steels - These two ;udgments require a ji1rther examination - Apart from that, these ;udgments did not deal with vires of r. 96ZP(3} - However. in view of the fact that Supreme Steels is a decision rendered by a Bench of three Judges, it is deemed appropriate that the question of law be settled by a Bench of an appropriate strength - Matter referred to larger bench - Hot re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - 1:5 - Central Excise Act, 1944 - 993 B c D E F G H 994 SUPREME COURT REPORTS [2017] 2 S.C.R. A s. 3A - Reference to larger bench. B c D E F G H Interpretation qf statutes: Legal fiction and presumption - Distinction between - Held: A fiction assumes somethilig which is known to be false, while presumption assumes something which may possibly be true. Legal fiction - Only sovereign legislative bodies can create legal fiction but not a subordinate /'!"' making body. Referring the matter to larger bench, the Court HELD: 1. Parliament from time to time took notice f!f the fact that some of the manufacturers/producers of excisable goods are evading duty by suppressing the information of the q11a•1tum of actual production/manufacture of goods undertaken by them. Therefore, Sectio113A was introduced which authorised a diff~rent mode of levy, assessment and collection of excise duty on notified goods. Under the Scheme of Section 3A, the need to constantly monitor the actual quantum of notified goods produced/ manufactured is obviated by declaring that the ACP of factory is deemed to be the annual production of the factory for the purpose of levy and collection of excise duty. [Para 24] [1010-B-C) 2. llot re-rolling Steel Mills Annual Capacity Determination Rules, 1997 prescribed the procedure by which the ACP is to be determined. Rule 3 prescribed a formula based 011 various factors mentioned therein for the determination of the ACP. The grievance of appellant is against Rule 5 which mandates that the ACP determined in accordance with Rule 3 be discarded i:t the circumstances mentioned under Ruic 5. Rule 5 stipulated that if the ACP determined in accordance with the preceding four Rules is less than the actual production of a particular assessee for the financial year 1996-1997, the authority determining the ACP is required to abandon the figure of ACP arrived at by employing the procedure contained in Rules 1 to 4 and adopt the actual production achieved by the assessce for the financial year 1_99697 to be the ACP of that assessce. The words "sflal/ be deemed to be" occurring in both Section 3A(2) and Ruic 5 appear to c;eate a fiction. But on a true and proper construction they do not create a legal fiction. Section 3A(2) only embodies a rule of evidence which command the department to presume certain facts. Such MIS. BHUWALKA STEEL INDUSTRIES LTD. v. UNIGN OF 995 INDIA presumptions are not unknown to law. Section 114 of the Indian Evidence Act, 1872 enacts a rule of evidence which re11uires a court to presume the existence of any fact which the Con rt thinks likely to have happened regard being bad to common course of natural events etc. The presumption created under Rule 5 is similar to the one contained in illustration (d) to Section 114 of the Evidence Act.There is a clear distinction in law between a legal fiction and presumption. A fiction assumes something which is known to be false; a presumption (whether conclusive or rebuttable) assumes something which may possibly be true. This distinction is regarded as being reinforced, as it were, in the case of the rebuttable presumption because such a presumption assumes a fact which prob11bly is true." "Presumptions are closely related to legal fictions .•. but they operate differently". "l<'ictions always conflict with reality, whereas presumptions may prove to be true''. Legal fictions create an artificial state of affairs by a mandate of the legislature. They compel everybody concerned including the courts to believe the existence of an artificial state of facts contrary to the real state of facts. When a fiction is created by law, it is not open to anybody to plead or argue that the artificial state of facts created by law is not true, barring the only possible course if at all available is to question the constitutionality of the fiction. It is settled law that only sovereign legislative bodies can create legal fictions but not a subordinate law making body. {Paras 25, 30, 31 and 32] [1010-C-D; 1012-B-D; 1013-A-D; 1014-A-B) 3. Rules of evidence are the principles of law which command the courts or other bodies whose duty is to determine the existence or otherwise of certain facts. The A11gfo stixo11 legal system recognises that facts could be established either by direct or circumstantial evidence. Presuming certain facts, if they are so commanded by law has always been recognised by our legal system to be one of the accepted processes for those bodies c_harged with the duty of collecting evidence. Therefore, law making bodies make provisions incorporating presumptions wherever they believe it a11propriate. But such practices have well recognised qualifications and limitation. Section 114 of the Evidence Act embodies some of the basic principles of the law of presumptions and the limitations thereon. Technica"lly, the A - --- B c D E F G H 996 A B c E G H SUPREME COURT REPORTS [2017] 2 S.C.R. Evidence Act may or may not be applicable to every body charged with the responsibility of collecting evidence. But the principles underlying the provisions do constitute valuable guides. They are based on sound principles of jurisprudence deduced from the observation of human conduct, natural course of event• and logic etc. (Para 34] (1014-E; 1015-A-BJ 4. Under the scheme of the Act, the actual quantli"m of production of an industry (manufacturer) is one of the essential factors for determining the tax liability of the manufacturer. Both Section 3A(2) and Rule 5 deal with the procedure for the determination of the quantum of production of a.factory producing notified goods. Section 3A of the Act authorises the Governruent to make rules for determining the ACP of the manufacturers. It further declares that the ACP so determined "shall be deemed to he the annual production of such goods by such factory". In other words, sub-section (2) commands that a factory whose ACP is determined in accordance with the rules made thereunder must be befo:ved to produce the same quantum of goods equal to the ACP for every succeeding year. By definition a "fiction always conflicts with the reality whereas presum11tion may be proved to be true". It, therefore, follows that there is no possibility of a fiction being rebutted by evidence. The belief flowing from Section 3A(2) regarding the annual production of a 111anufacturcr ~ould be rebutted by adducing evidence. Section 3A(4) provides for such rebuttal. Therefore, Section 3A(2) embodies only a rule of evidence (pres11111ption) hut does not create a legal fiction. The language employed by the draftsman is likely to mislead to a conclusion that a fiction is created. But on a true and proper construction of the entire Scdion 3A the only possible conclusion is that Section 3A(2) embodies only a presumption (rule of evidence). (Paras 36-38] (1015-D, H; 1016-A-DJ 5. Under the Scheme of the Rules of 1997, the first four rules stipulated the procedure for determining the ACP of the · manufacturers of the class to which the ap11ellants belong, by drawing an appropriate presum11tion having regard to the tcchincal data relating to the machinery employed by the manufacturer etc. The lawmaker was conscious of the fact that the actual quantum of goods that can be manufactured in a factory docs not solely depend on the ACI' of the factory. It depends M/S. BHUWALKA STEEL INDUSTRIES LTD. v. UNICN OF INDIA upon a number of other variable factors too .. For example, though the machinery employed by a manufacturer has the technical capacity to produce a certain quantum (maximum produ~tion) of goods, in a given interval of time, the manufacturer may not always achieve the maximum production because of the non-availability of either the requisite energy to operate the factory or finance or raw-material etc. The first four rules of the Rule of 1997 create a scheme of evidence by which a presumption (based on the technical specification of the manufacturers' machinery) of the possibility of a certain quantum of production is to be made. However, the lawmaker visualized that in certain cases such a process may lead to a conclusion that the ACP of a manufacturer is less than the actual production that was achieved by employing the same machinery at an earlier point of time - a conclusion inconsistent with the established factual data. Therefore, it is stipulated under Rule 5 that in such circumstances the ACP of the factory must be "deemed to be" equivalent to the actual production achieved in the financial year prior to the coming into force the Rules of 1997. Rule 5 recognises the possibility of an error in arriving at the ACP by applying the formula contained in Rule 3. Because the formula itself is based on certain assumptions. Therefore, Rule 5 provides that the determination of the ACP made in accordance with the procedure conbtined in Rule 3 is liable for correction in some cases, in the circumstances indicated therein. But the benefit of Section 3A(4) i.e. U1e right to rebut the presumption regarding the annual production is denied to a sub-class of manufacturers falling under Rule 96ZP(3)) who are also a part of a larger class falling under the Scheme of Rule 96ZP of the Central l<:xcise Rules, 1944. But for the declaration of sub-rule (3) of Rule 96ZP, an assessee whcse ACP is determined in accordance with the Rule 3 of the Rules of 1997 would be entitled under sub-section (4) of Section 3A of the Act, to s~ek the determination of his actual 11roduction and the tax liability thereon. [Paras 39-411 [1016-E-II; 1017-A-D] 997 A B c D E F G 6. The determination of the ACP is a one time affair. It ap11ears from the factors indicated in the Rule 3 that the ACP would remain unaltered so long as there is no change in the machinery employed and the 'number of utilized hours" of the machinery remains constant. But the "number of utilized hours" H 998 A B c D E F G H SUPREME COURT REPORTS [2017] 2 S.C.R. could vary from time to time depending upon various factors, such as, the availability of electric power, capital or labour etc. Such variations could result in a situation that the actual production of the factory for any given interval of time is less than the ACP. Therefore, it is declared under Section 3A(4) that an assessee is entitled to seek determination of the actual production of his factory if it is less than the ACP. Such an opportunity provided under Section 3A(4) is a recurring opportunity available to the assessee from time to time. The determination of amount of dnty payable by the assessee is not a one time affair. Such a determination is· to be made periodically. Therefore, the 011portunity of placing evidence for the establishment of actual production for a, period relevant for the assessment mn~t 'be available to the assessee from time to time. (Paras 42, 431 11017E-IJ; 1018-A] 7. Rule 96ZP(3) is relevant in the context of the assessment of duty for those assessees who choose to opt for the payment of the excise duty on a monthly basis. The duty payable by such assessees would be Rs.300 x ACP in metric tonnes. Rule 96ZP(3) stipulates that an assessee seeking to avail the sct.eme (concessional rate of duty) under Rule 96ZP(3) is required to make application in the prescribed format. The Rule is silent about the point of time at which such an ap11licalio11 is requircti"to be made. But sub-rule (3) stipulates the time within which the duty is ret1uircd to be paid, i.e.,h1 the "beginning of each month" and "latest by the tenth of each month". It is possible that in a given case an assessee choosing at a given point of time to make payment of duty on monthly basis calculated in terms of sub-rule (3) but a few months later (for that luatter even a month later), for various legitimate reasons, production may fall considerably below the ACP (of the assessees factory). It is possible, in some cases there can be total cessation of the manufacturing activity for reasons beyond the control of the assessee. If the option exercised by an assessce under Rule 96ZP(3) is held to be good for eternity it would not only lead to illogical consequences but also to an unconstitutional collection of taxes without there ~eing a taxable event. Rule does not prevent the asscssec from opting out of the Scheme of Rule 96ZP(3). After availing the scheme for a month by paying the duty in advance, if the assessee ends up in MIS. BHUWALKA STEEL INDUSTRIES LTD. v. UNICN OF 999 INDIA a situation of not being able to produce the quantum of goods equivalent to 1/12 of his ACP, the Rule does not compel the assessee to continue the availment of concessional rate of duty (for the next month) on a quantum of production which he is unable to achieve. The assessee must have an option to make the payment of duty in accordance with Rule 96ZP(l) at a higher rate but on the actual production; For those assessees who chose to pay the duty at higher rate in accordance with sub-rule (1) the benefit of section 3A(4) is available. {Paras 44-47] {1018-B-H; 1019-A-B] 8. It is argued for the respondent in view of the two judgments of this Court in Ve11us Casti11gs mu/ Supre1112 Steels, the question regarding the vires of sub-rule (3) of Rule 96ZP of the Central Excise Rules, 1944 is no more res-i11tegm. It is also submitted by the respondent that this Court has already declared A B c that the assessee who makes a choice once to avail the scheme under sub-rule (3) cannot go back on his choice. In I?oth the . D abovcmentioned cases,'this Court was dealing with R.ule 96Z0(3) of the Central Excise Rules, 1944. Neither the vires of Rule 96ZP(3) nor its interpretation actually fell for consideration of this Court in either of the these cases. However, in Ve11us Casti11gs, at para 9, a reference was made to Rule 96ZP and this Court observed that "Rules 96ZO and 96ZP provide for procedure to be followed by the manufacturer of ingots and billets and hot rerolled products respectively. The scheme envisaged under these provisions is identical". The finding that the scheme of both the Rules is identical cannot be acce11ted. There are broad similarities between the Rules but they are not identical. [Paras 48-51!] [1019C-F] 9. In Ve11us Casti11gs; this Court held that both the abovementioned Rules contain scheme of "two alternative procedures to be adopted at the option of the assessee" and concluded that "the manufacturers, if they have availed the procedure under Rule 96Z0(3) at their option, cannot claim the benefit of determination of production capacity umler Section 3A(4) of the Act.which is specifically excluded". This Court only dealt with Rule 96Z0(3) but not Rule 96ZP(3). Seco11dly, Section 3A( 4) of the Act docs not deal with the determination of the production capacity of the factory. It only deals with the right of E F G H 1000 A B c D E F G H SUPREME COURT REPORTS (2017] 2 S.C.R. the assessee to establish that notwithstanding the determin-.tion of the ACP, the actual production achieved is less than the ACP determined. The Court concluded "that if the entire enactment is read as a whole indicates the purpose and that purpose is carried out by the Rules, the same cannot be stated to be ultra vires of the provisions of the enactment." Such a statement of law has no basis either in precedent or on any settled principles of interpretation of statutes. On the other hand, it is in conflict with a long settled line of authorities that subordinate legislation which is in conflict with the parent enactment is unsustait.able. [Paras 51, 52] [1020-A-B, J<'-H; 1021-A] 1 O. The decision in Supreme Steels was rendered by a Bench of three learned Judges. The vires of Rule 96ZO was directly in issue in Supreme Steels. This Court in Venus Cll»tiiigs noted that "in these proceedings the validity of the provisions of the Rules is not in challenge but only their interpretation and application have to be examined". However, the Judges i11 Supreme Steels opined that the controversy was finally settled by the judgment of this Court in Vt!nus Cllsti11gs. Apart from the various problems in the abovementioned two judgments, there are marked differences in the language employed under Rule 96ZP(3) and the scheme appears to be different from the one adopted under the scheme of Rule 96Z0(3). [Paras 53, 54] [1021-B-CJ 11. Rule 96ZO deals with levy, assessment and colle~tion of excise duty on the manufacture of non-alloy steel ingots and billets. Duty on such goods is payable at the rate of Rs. 750/- per metric tonne. Sub-rule (3) prescribes levy and collection of a lump sum ofRs.5 lakhs per month in cases of those manufacturers who have a total furnace capacity of three metric tonnes installed ' iii their factories. However, such a scheme is available at the option of the assessee. ln other words, a manufacturer has a choice to make a lump sum payment of Rs.5 lakhs, irrespective of his actual production for that month, in two instalments instead of paying the duty at the rate of Rs.750/- per metric tonne of the actual production of the manufacturer. Whether the capacity of three metric tonnes in the said sub-rule is the capacity of the factory per day or per month or per annum is not very clear from the language of the Rule •. The expression does not appear to he defined under the Rules. [Para 55] [1021-D-E; 1022-AJ MIS. BHUWALKA STEEL INDUSTRIES LTD. v. UNION OF INDIA 12. Coming to Rule 96ZP(3), it also provides an option to the assessee falling under the Rule to pay the duty at the concessional rate of Rs.300 per metric tonne contrary to the liability of the assessees who do not opt to avail the procedure under sub-rule (3) to pay Rs.400 per metric tonne. But both the classes of assessees are required to pay the total duty calculated on the ACP of the factory. While those who choose to pay the lower rate of tax under sub-rule (3) pay the tax every month and those who do not opt to avail the scheme under sub-rule (3) are required to pay tax long after duty actually falls due as indicated under sub-rule (1) and (2). The only similarity between Roles 96Z0(3) and 96ZP(3) is that both the Rules seek to eliminate the benefit of the procedure under Section 3A(4) of the Act in cases of those assessees who choose to opt for levy and collection of excise duty in accordance with the sub-rules (3) which are exceptions to the general Rules of levy and collection of duties provided under Rules 96ZO and 96ZP. Therefore, it is difficult to accept that the issue is covered by the judgments of this Court in Ve11us Ctu·ti11gs and Supreme Steels. These two .ilidgments require a further examination. In view of the fact that Supreme Steels is a decision rendered by a llcnch of three Judges, it is deemed appropriate that the question oflaw be settled by a Bench of an appropriate strength. [Paras 56-58] [1022-ll-J<') Commissioner of Central Excise & Customs v. Venus Castings (P) Ltd. (2000) 4 SCC 206 : [2000) 2 SCR 988;Union of India & Others v. Supreme Steels and General Mills & Others (2001) 9 SCC 645; Consolidated Coffee Ltd. & Another v. Coffee Board, Bangalore (1980) 3 SCC 358 : [1980) 3 SCR 625; Agricultural Market Commillee v. Shalimar Chemical Works Ltd. (1997) 5 SCC 516 : [1997) l Suppl. SCR 164 - referred to. Case Law Uefcrcncc (1997) 1 Suppl. SCR 164 [1~80] 3 SCR 625 referred to referred to Para 19 · Para31 [2000] 2 SCR 988 referred to Para 48 (2001) 9 SCC 645 referred to Para 48 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7823 1001 A B c D E F G of2014. . H 1002 SUPREME COURT REPORTS [2017] 2 S.C.R. A From the Judgment and Order dated 27.09.2013 of the High Court B c D E F G H of Karnataka at Bangalore, in W.A. No. 315 of 2006 WITH C. A. Nos. 7825 and 7824 of2014. Mrs. Nalini Chidambaram, Sr. Adv., Abhishek Anand, Aditya Bhattacharya, Anandh K., Victor Das, M. P. Devanath, Yogendra, Vikas Mehta, Ms. Anushree Menon, Advs. for the Appellants. K. Radhakrishnan, Sr. Adv., Mrs. Nisha Bagchi, H. R. Rao, Ms. Pooja Sharma, B. Krishna Prasad, Advs. for the Respondents. The Judgment of the Court was delivered by CHELAMESWAR, J. l. These three appeals are factually interconnected and also raise a common question oflaw. 2. The appellants in Civil Appeal No.7823/2014 M/s. Bhuwalka Steel Industries Ltd. originally owned three (3) industrial units (Hot Rerolling Steel Mills) located in the State of Kamataka. Subsequently, two of those units came to be acquired by the appellants in the othe~ two appeals in this batch. Further details of the acquisition may not be relevant for the purpose of this judgment. 3. The production activity carried on by the three industrial units of these appellants is subject to levy of excise duty under the Central Excise & Salt Act, 1944 (hereafter 'THE ACT'). Section 31 of THE ACT is the basic charging section. 4. However, by the Finance Act, 1997, Section 3A' came to be introduced in THE ACT. "Section 3A. Determination of annual capacity of production of the factory for levy of Excise duty.- 1 Section 3 insofar as it is relevant' for the purpose of this judgment read at the relevant point of tin1e: ·'Section 3. Duties specified in the First Schedule and the Second Schedule to the Central Excise Tariff Ac~ 1985 to be levied.- (I) There shall be levied and collected in such 1nanner as may be prescribed, - (ri.) a duty of excise on all excisable goods which are produced or manufc.cturcd -·'in India as. and at the rates. set forth in the First Schedule to the Central Bxcise Tariff Act. 1985;" 'Ins. By Act 18 of2008, sec. 79 (w.e.f. I0-5-2008). Earlier section 3Awas inserted by Act 81 of 1956. sec. 2 (w.c.f. 22-12-1956) and was omitted by Act 58 of"1960, sec. 2 and Sch. I (w.e.f. 26-12-1960) and was again inserted by Act 26 of 1997, sec. 81 (w.e.t: 14-5-1997) and was amended by Act IO of 2000, sec. 93 (w.e.f. 1-4-2000) and 11as again omitted by Act 14 of 2001, sec. 121 (w.e.f. 11-5-200 I). MIS. BHUWALKA STEEL INDUSTRIES LTD. v. UNION OF INDIA [CHELAMESWAR, J.] (I) Notwithstanding anything contained in Section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, .such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. (2) Where a notification is issued under sub-section (I), the Central Government may, by rules, provide for determination of the annual ca11acity of production, or such factor or factors relevant to the annual capacity of production of the factory in which such goods are produced, by the Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory: Provided that where a factory pioducing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production. (3) The duty of excise on notified goods shall be levied, at such rate as the Central Government may by notification in the Official Gazette specify, and collected in such manner as may be prescribed: Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seven days, duty calculated on a proportionate basis shall be abated in respect of such period ifthe manufacturer of such goods fulfils such conditions as may be prescribed. (4) Where an assessee claims that the actual production of notified goods in his factory is lower than the pn:,duction determined under sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and redetermine the amount of duty payable by the assessee with reference to such actual production at the rate specified in sub-section (3 ). (5) Where the Commissioner of Central Excise determines 1003 A B c D E F G H 1004 A B c D E F G H SUPREME COURT REPORTS [20 I 7] 2 S.C.R. the actual production under sub-section ( 4 ), the amount of duty already paid, if any, shall be adjusted against the duty so redetennined and if the duty already paid falls short of, Oi is in excess of, the duty so redetermined, the assessee shall pay the deficiency or be entitled to a refund, as the case may be. (6) The provisions of this section shall not apply to goods produced or manufactured,- (i) in a free-trade zone and brought to any od1er place in India; or (ii) by a hundred per cent export-oriented undertaking and alkiwed to be sold in India. Explanation I. - For the removal of doubts, it is hereby clarified that for the purposes of Section 3 of the Customs Tariff Act, 1975 (51 of 1975), the duty of excise leviable on the notified goods shall be deemed to be the duty of excise leviable on such goods under the Schedule to the Central Excise Tariff Act, 1985 (5of1986), read with any notification for the time being in force. Explanation 2. - For the purposes of this section the expressions "free trade zone" and "hundred per cent exportoriented undertaking" shall have the meanings assigned to them in section 3." [emphasis supplied] Section 3A authorised the identification of a certain class of goods and levy and collection of excise duty on such goods otherwise ttan in accordance with the scheme of levy and collection contemplated under Section 3 of THE ACT. It appears from the language of Section 3A, Parliament believed that manufacturers of certain classes of goods are evading payment of excise duty. It authorised the Government of India to identify the goods, the manufacturers of which are resorting to evasion of excise duty. Section 3A( I) stipulated that such identified goods are to be notified in the Official Gazette (hereafter "NOTIFIED GOO!)S"). Section 3A(3) as it stood at the relevant point of time stipulated that the Central Government may by a notification in.the official gazette specify the rate of duty to be levied on NOTIFIED GOODS and the method and manner of the collection thereof. In other words, notwithstanding the prescription of the rates of duty pursuant to Section 3 and the procedure for the assessment of duty liability and the mode of collection of such assessed duty, Goven~ment oflndia is authorised under Section JA to prescribe different rates of MIS. BHUWALKA STEEL INDUSTRIES LTD. v. UNION OF INDIA [CHELAMESWAR, J.] duty and different modes of assessment and collection of duty on the NOTIFIED GOODS. Under sub-section (2), the Government of India was at:thorised to make rules providing for either the determination of the "annual capacity of production" (hereafter ACP) or 'the factors relevant to the ACP' of the factory in which NOTIFIED GOODS are produced. The determination of the ACP is required to be made by the "Commissioner of Central Excise". It further declared that a factory where ACP is determined shall be presumed to annually produce the NOTIFIED GOODS equivalent in quantum to its ACP. Sub-section ( 4) stipulates that in a case where an assessee "claims that the actual production of his factory is lower than" the ACP, the assessee is entitled to seek the determination of the actual production of the NOTIFIED GOODS in "his factory" by adducing appropriate evidence. Upon such claim being made, the Commissioner of Central Excise is required to determine the actual production of the assessee's factory and also "redetermine the amount of duty payable by the assessee with reference to such actual production". 5. Admittedly, the goods manufactured by the three appellants fall under the same class and described under the Excise Tariff Act as "nonalloy steel hot re-rolled products" and they were NOTIFIED GOOQS at the relevant point of time. 6. In exercise of the powers conferred under Section 3A(2) of THE ACT, a set of Rules came to be framed by the Goven•ment of India w.r.t. the goods manufactured by the appellants before us known as the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 (hereafter "RULES of 1997") undera notification dated 1.8.1997. Initially, the said notification contained four Rules for "determining the annual capacity of production of a factory" with the aid of ''hot-ReRollingMill". 7. A month later, on 30.8.1997, Rule 5 which is the bone of contention in the present case came to be inserted in the said rules: "5. In case, the annual capacity determined by the formula in sub-rule (3) of rule 3 in respect of a mill, is less than the actual production of the mill during the financial year 1996-97, then the annual capacity so determined shall be deemed to be equal to the actual production of the mill during the financial year 1996-97." [emphasis supplied] 1005 A B c D E F G H 1006 A B c D E F G H SUPREME COURT REPORTS (2017] 2 S.C.R. The true meaning and purport of the rule shall be examined later. 8. It is also necessary to take note of the fact that a set of Rules known as Central Excise Rules, 1944 were framed by the Government oflndia in exercise of the power conferred under various provisi0ns of the Central Excise Act, 1944. Rule 96ZPofthe said rules prescribes an elaborate procedure to be followed by the manufacturers of 'Non-.\lloy Steel Hot Re-rolled products" falling under various heads of the Excise Tariff Act, 1985. The said Rule occurs in Chapter Xl of the Rules of 1944. Chapter XI was inserted in the Rules w.e.f. 01.08.1997. 9. Section 3A(3) authorised the Central Government to specify the rate at which the central excise duty is Jeviable on NOTl"IED GOODS by notification. Obviously, it is in exercise of the power under Section 3A(3), Rule 96ZP was made prescribing a fixed rate of du