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SC sets aside Bombay HC order on penalty on ghutka manufacturer

The top court further said its interim order of stay on penalty would continue till the High Court takes up the matter for further hearing
Last Updated 11 September 2021, 13:44 IST

The Supreme Court has set aside a Bombay High Court order, which confirmed about Rs 120 crore penalty and duty imposed by the Central GST Commissioner on a man for "clandestinely manufacturing and clearing ghutka" with a brand name 'Aryan Guthaka' at his two properties in Ichalkaranji, Maharasthra between March 2013 to August 2018.

A bench of Justices M R Shah and Aniruddha Bose said there would be a stay on Rs 60 crore penalty but clarified that there would be no stay on recovery of Rs 60 crore duty and interest on the company.

After hearing advocate Sanjay M Nuli, the court asked the High Court to decide the issue afresh as the company challenged vires of the constitutional validity of Section 3A of the Central Excise Act, 1944 (which is the genesis of Rule 17(2) of the Pan Masala Packaging Machines Rules 2008).

"The High Court has not at all addressed the issue on vires on merits in detail. The question of vires cannot be decided by the appellate authority/tribunal in an appeal against the order in original," the bench said, remanding the matter back to the High Court for fresh consideration.

The top court further said its interim order of stay on penalty would continue till the High Court takes up the matter for further hearing.

"It is clarified that there shall not be any stay on recovery of duty and interest. It will be open for the Department to proceed further with the recovery of the duty and interest in accordance with law," it said.

In his plea, the manufacturer contended an arbitrary order was passed on August 21, 2019, demanding a payment of excise duty of Rs 59,60,68,224 and additionally a collective penalty of Rs 59,60,53,224 which was highly imaginary.

The petitioner further claimed the High Court refused to exercise its writ jurisdiction in spite of him raising the issues of the constitutional validity of the charging provision, violation of principles of natural justice, and denial of opportunity of cross examination.

Notably, the larger issue on the constitutional validity of Section 3A of the Central Excise Act, 1944 (which is the genesis of Rule 17(2) of the Pan Masala Packaging Machines Rules 2008) is still pending before the top court.

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(Published 11 September 2021, 13:41 IST)

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