Dhariwal Industries Pvt. Ltd. Vs Union of India (Karnataka High Court)
The Karnataka High Court considered a batch of writ petitions challenging the constitutional validity of the Health Security se National Security Cess Act, 2025, the Health Security se National Security Cess Rules, 2026, and the notifications issued thereunder. The petitioners were manufacturers of Pan Masala falling under Customs Tariff Item 2106 90 20, who manufacture and pack Pan Masala using pouch-packing machines. They challenged the levy of cess imposed on machines used for manufacture and production of Pan Masala.
The judgment traced the constitutional and statutory background leading to the GST regime, including the Constitution (One Hundred and First Amendment) Act, 2016, insertion of Articles 246A, 269A and 279A, and the enactment of the CGST Act and the IGST Act. The Court noted that Pan Masala was already subjected to GST under the GST framework before the enactment of the impugned legislation.
The petitioners contended that the impugned Act and Rules were beyond the constitutional scheme. According to them, Pan Masala was already subject to GST under Articles 246A and 279A, Article 271 did not permit a surcharge on GST, and cess could not be imposed on deemed production based upon machine ownership or machine capacity instead of actual production. They argued that the Government sought to levy cess merely on the number and capacity of machines, which had no legal basis.
