GST and Excise Duty leviable on Tobacco and Tobacco-derived Products: Karnataka High Court

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By Rasheela Basheer – On October 7, 2022 11:10 am

GST - Excise Duty - Tobacco - Tobacco derived Products - Karnataka HC - taxscan

In a significant ruling, the Karnataka high court has ruled that the Union government is entitled to levy Central GST (CGST) as well as excise duty on tobacco and tobacco-derived products.

Dismissing a bunch of petitions by tobacco manufacturers against the levy of both GST and excise duty on the subject goods, the Court held that “The levy of excise duty on tobacco and tobacco products is a matter of public policy and this court in exercise of writ jurisdiction would not interfere with the same. The CGST itself contemplates levy of excise duty upon tobacco and tobacco products apart from they being taxed under the provisions of CGST,”

Justice M I Arun was considering petitions by Ghodawat Packers LLP, H I Tamboli and Sons, Rajnandini Foods Pvt Ltd, Balajee Pouches, Ghodawat Foods International Limited and Ghodawat Industries India Private Limited, against the imposing excise duty and National Calamity Contingent Duty (NCCD) on tobacco products manufactured and sold in the Belagavi jurisdiction. Before the Central Goods and Services (GST) Act, 2017, tobacco products were taxed under Central Excise Act read with Central Excise Tariff Act. The Central Excise Act was repealed except for goods included in Union List of Seventh Schedule of the Constitution. The Central Excise Tariff Act was also repealed.

Noting that though the Excise Act was repealed, the High Court held that the tobacco and tobacco products were added to the Seventh Schedule of the Constitution under Entry 84. “Thus, apart from levy of taxes under the provisions of CGST Act, 2017, excise duty can be levied on tobacco and tobacco products under the Central Excise Act, 1944.”

As for the NCCD, the HC noted that Section 136 of the Finance Act, 2001 contemplates levy of such a duty. “NCCD is a surcharge and a type of excise duty which can be levied independently of the excise duty as contemplated under the provisions of Fourth Schedule to the Central Excise Act, 1944. Thus, levy of NCCD in the absence of levy of excise duty cannot be considered as bad in law,” the Court said.To Read the full text of the Judgment CLICK HERE

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