Karnataka HC upholds tobacco products' double taxation

Bengaluru: The National Calamity Contingent Duty (NCCD) and excise tax on tobacco products have been maintained by the Karnataka High Court. The order was issued by Justice M I Arun in response to applications filed by Ghodawat Packers LLP and five others challenging the imposition of NCCD. The petitioners argued that because there was no excise duty on tobacco and tobacco products from July 1, 2017, to July 6, 2019, NCCD could not be imposed. Therefore, NCCD shouldn't have been levied during that period.

Prior to the Central Goods and Services Act of 2017, the Central Excise Act of 1944's tax laws applied to tobacco goods (read with Central Excise Tariff Act, 1985). The court stated that NCCD is a surcharge and a type of excise duty that can be imposed independently of the excise duty as contemplated under the provisions of the Fourth Schedule to the Central Excise Act, 1944, noting that repealing the Central Excise Act does not relieve the petitioners from paying NCCD as determined under the Seventh Schedule to the Finance Act. Therefore, the court concluded, the imposition of NCCD in the absence of the levy of excise duty cannot be regarded as illegal.

The court further stated that it would not interfere since the imposition of excise taxes on tobacco and tobacco-related products is a matter of public policy.

In addition to taxing tobacco and tobacco products in accordance with the CGST's rules, the CGST itself contemplates the imposition of an excise charge. There isn't a mistake.

The court ruled that the respondents, the Ministry of Finance and the Commissioner of Central Tax, are authorised to impose both the CGST and the excise duty on tobacco and tobacco-related products.