A doubt has arisen whether the Union Government is still competent to impose Central Excise Duty on all goods barring petroleum products and tobacco after bringing into force with effect from 16 September, 2016 the provisions of Section 17 of the Constitution (101^st) Amendment Act, 2016 and whether the Union Government’s levying the tax from 16^th September, 2016 onwards is legally valid.

As we all know, the Constitution (101^st) Amendment Act, 2016 (“Constitutional Amendment Act”) received the assent of the President on 08.09.2016. Vide Notification dated 10.09.2016, the Central Government exercising the powers vested under section 1(2) appointed 12.09.2016 as the date on which the provisions of section 12 of the Constitution (101st) Amendment Act shall come into force.

Subsequently, the Central Government notified that the provisions of the remaining Sections of the said Constitutional Amendment Act, have been brought into force w.e.f 16.09.2016 –  Vide Notification dated September 16, 2016 Since Section 1 also  has been brought into force w.e.f 16.09.2016 which clearly creates a doubt whether there was power delegated upon the Central Government by the Parliament of India to issue Notification under Section 1 (2) of the Constitution Amendment Act, 2016 on 10.09.2016 (vide which 12.09.2016 was fixed as the date on which the provisions of Section 12 shall come into force), even without bringing Section 1 into force.

Further confusion also has arisen as below after the Notification dated 16.09.2016 in respect of  Section 17.

The notification provides that the government will not levy excise duty on goods other than petroleum products and tobacco products from this date. The notification also binds States to accept GST within a year or they will lose power to tax.

“Plain reading of the notification shows that after 16.09.2016, Central Excise is leviable only on petroleum products and tobacco products. This cannot be the intent, this needs to be corrected immediately as it could lead to litigation,” said S D Mazumder, former Chairman, Central Board of Excise and Customs.

The Constitution (101^st) Amendment Act, 2016, has made changes in Entry 84 of List 1 or the Union List of the 7th Schedule of the Constitution.  Essentially, the amended list provides that excise duty can be levied only on petroleum and petroleum products and tobacco and tobacco products, thereby limiting the scope of Central Excise Act to these specified products.

This provision should have come into force when GST is rolled out. However, the Central Government has notified this section from 16.09.2016 itself, when the GST is not in force.

In our view, the substance of this Notification is that the Central Government has surrendered the power to levy Excise Duty except in the case of the goods mentioned, experts said.

Further,  another problem has arisen as the Centre in a hurry to carry on with the GST work notified all the provisions of the Constitution (101^st) Amendment Act, 2016, including this one that would not allow States to collect taxes after one year making it incumbent upon them to implement GST from next year.

Technically speaking, the Excise Duty collected on goods after 16^th September, 2016 is not sanctioned by the law.

Section 19 of the Amendment Act provides “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.”

But, this provision in the amendment also has some lacuna. Even if the wording ‘competent legislature’ is taken to mean ‘Parliament’ and ‘tax on goods and services’ to include all central taxes, the provision only pertains to taxation in the States and does not include Union Territories. Even if States are construed to mean UTs, it would not include those without legislatures.

Ideally speaking, some of the Sections should have been notified with effect from 1 April 2017 to ensure that the Centre could have continued levying existing Central taxes / duties.

(Source: The Economic Times and other reliable sources)