The Bombay High Court has recently given a decision in the case of CCE vs Standard Drum & Barrel Mfg. Co. 2006 (199) ELT 590 (Bom.), that refunds arising out of provisional assessment will also be subject to the requirement that there is no unjust enrichment.
Even if the Rule was made later than the Act on the issue, the provisions of the Act will always prevail even in the absence of the Rule.
The High Court has clearly laid down that the Excise Rules have to be read in the context of the Excise Act and in the case of a conflict between the Act and the Rules, the Act will prevail.
In other words, the Rules are what is known as subordinate legislation and they have to remain always subordinate to the main law.
The issue about subordinate legislation consisting of Rules and notifications has been the subject of judicial pronouncements over a period of time.
There is a very famous decision of the House of Lords in the case of Institute of Patent Agents vs Joseph Lockwood 1894 AC 347 wherein Lord Herschell delivering the judgement observed that in case of conflict between one section and another or between a section and a Rule, one has to determine which one is a leading provision and which one is a subordinate provision, and which must give way to the other.
That would be so with regard to the enactment and with regard to the Rules which are to be treated as if within the enactment, the judgement said. This judgement has been the fountainhead of many subsequent decisions.
While interpreting the Rajasthan Sales Tax Rules, 1955, the Supreme Court has ruled in the case of Associated Cement Company Ltd. vs Commercial Tax Officer 1981 (4) SCC 578, 599, that the Rules which are framed under the statute should be read as a part of the statute itself in view of the express provision contained in sub-section (5) of Section 26 of the Rajasthan Sales Tax Act, 1954.
The Supreme Court has further observed that wherever express provision in this statute is there for making Rules, the effect is that the Rules become part of the statute.
In another judgement in a constitutional case, Indian Express Newspapers (Pvt.) Ltd. vs UOI AIR 1986 SC 515, regarding the impact of freedom of press caused by the withdrawal of exemption notification partially under the Customs Act, 1962, the Supreme Court observed that a notification which is a piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by legislature. Subordinate legislation may be questioned on any of the grounds on which plenary legislation is questioned.
In addition, it may be questioned on the ground that it does not conform to the statute under which it is made. It may further be questioned on the ground that it is contrary to some other statute. That is because subordinate legislation must yield to plenary legislation. It may also be questioned on the ground that it is unreasonable.
Unreasonable not in the sense of not being reasonable but in the sense that it is manifestly arbitrary. In England, the judges would say, Parliament never intended the authority to make such rules. They are unreasonable and ultra vires.
From the above judgements, the conclusion is that (i) Rules and notifications issued under the statute have the same effect as the statute itself, as if of being enacted in the statute, (ii) expressions in the Rules and notifications have the same meaning as in the statute, (iii) Rules and notifications have to be necessarily interpreted as intra vires to the Act under which they have been issued, (iv) they do not have the same degree of immunity as a statute passed by a competent legislature and (v) subordinate legislation must yield to plenary legislation.