On September 16, 2016, The Government vides its Notification dated 16/09/2016 had brought in effect all the sections of Constitutional (One Hundred and First Amendment) Act, 2016 to effect, which will result in rolling out of Goods & Service Tax (“GST”). It is a welcome step and shall be appreciated.
However, this article is to bring out the other effects of the amendments, which is a result of negligence. As per the view of author, The Duty of Excise shall be now levied on production or manufacture of only petroleum or tobacco products and not on all the goods. This would be with effect from 16/09/2016. Thus the article is based on the interpretation of Author and his views on Constitution Amendment.
Article 265 of The Constitution of India (“COI”) provides that no tax shall be levied or collected except by the authority of law. Further Article 246 makes a clear division of power between Centre & State as enumerated in Schedule-VII of The COI.
Prior to September 16, 2016 the Duty of Excise was levied and collected by the Central Government under The Central Excise Act, 1944, which was constitutionally backed by entry no. 84 of List-I (Union List) of the Seventh Schedule of The COI, which was read as under –
“84. Duties of excise on tobacco and other goods manufactured or produced in India except—
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics,
but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.”
However, this entry is now standing amended by The Constitutional (One Hundred and First Amendment) Act, 2016 and would be now read as –
“84. Duties of excise on the following goods manufactured or produced in India, namely:—
(a) petroleum crude;
(b) high speed diesel;
(c) motor spirit (commonly known as petrol);
(d) natural gas;
(e) aviation turbine fuel; and
(f) tobacco and tobacco products.”
Due to this amendment in the entry 84 of The Seventh Schedule of The COI, from Sept. 16, 2016, The Power of Central Government has been brought to limited extent i.e., now the Central Government has power to legislate had been curtailed and now the Central Government can only levy duty of excise on specified products. As a result of this The Central Excise Act, 1944 shall become ultra vires to the extent inconsistent with The COI. Which means The Central Excise Act, 1944 shall remain valid/enforceable for only specified goods and on rest goods shall now be out of scope of levy of Excise Duty.
There is a counter to this, by saying that Section 19 of Constitutional (One Hundred and First Amendment) Act, 2016 provides from transitional provision, says –
“19. Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”
For this the author would like to bring to the kind attention of the readers that the scope of this transitory provision shall be limited to the taxes levied under an act enacted by Legislature or any other authority (Eg. Municipal Corporations). It shall not cover within ambit the taxes which are legislated by The Parliament. Thus the taxes such as VAT, Entry Tax, etc. is now also constitutionally backed even after the change in List –II (State List) of The Seventh Schedule of The COI.
What would be fate of Service Tax?
The Service Tax is levied by Government under Chapter V of The Finance Act, 1994 which was legislated by The Parliament under entry 97 of The List-I (Union List) of The Seventh Schedule of The COI. There is no change made to the said entry and thus the Service Tax shall continue to be levied on Services until The Finance Act, 1994 is repealed by the Government.