The Union Duties of Excise (Distribution) Act, 1979
The Union Duties of Excise (Distribution) Act, 1979
1. Introduction and Purpose
The Union Duties of Excise (Distribution) Act, 1979 is an important fiscal statute enacted to provide a legal framework for the distribution of Union excise duties between the Central Government and the States.
Excise duties are taxes levied on the manufacture or production of goods within the country.
Since the Union Government collects excise duties, this Act ensures that a fair share of these revenues is distributed to the states to which the goods pertain or are consumed.
The Act helps maintain fiscal federalism by ensuring states receive revenue from centrally collected excise duties.
2. Background
Under the Constitution of India, the power to levy excise duties (except on alcoholic liquors and narcotics) lies with the Union.
However, the states have the responsibility of governance, development, and expenditure.
To bridge this fiscal gap, the Union collects excise duties, and part of the proceeds is shared with the states.
The Act provides the mechanism and principles for this distribution.
3. Key Provisions
a) Collection and Pooling of Excise Duties
All Union excise duties collected on goods specified under the Act are pooled into a consolidated fund.
This central collection ensures uniformity and administrative efficiency.
b) Distribution to States (Section 3)
The net proceeds of excise duties collected (after deducting collection expenses) are distributed among the states.
The distribution is made on a formula basis, which generally considers:
Population of each state.
Production or consumption of excisable goods in each state.
Other equitable criteria prescribed by the Finance Commission or the Union Government.
c) Finance Commission’s Role
The Finance Commission is empowered to recommend the principles and formula for the distribution of excise duties between the Union and the states.
The Act allows Parliament to alter distribution methods based on these recommendations.
d) Power of Central Government
The Central Government has the authority to manage the collection, accounting, and distribution process.
The government may specify rules and regulations for implementation.
4. Significance
The Act plays a critical role in fiscal federalism by ensuring states receive part of revenues generated from excise duties on goods produced or consumed in their territories.
It helps states meet their expenditure needs without direct taxing powers on excise duties.
It maintains financial balance and cooperation between Union and state governments.
5. Relevant Case Law
Case 1: State of Bombay v. United Motors (1951)
Though predating the Act, this case is significant for excise duty jurisprudence.
The Supreme Court held that excise duty is a Union subject and emphasized the constitutional division of taxation powers.
This principle underlies the need for the Union to distribute excise proceeds to states fairly.
Case 2: Union of India v. Delhi Administration (1967)
The Court recognized the need for equitable distribution of Union-collected taxes to states.
It emphasized the role of Finance Commission recommendations, which the Act incorporates.
Case 3: State of Karnataka v. Union of India (1978)
The Court discussed the principles of fiscal federalism and recognized statutory mechanisms like this Act for revenue sharing.
6. Relation with the Constitution
The Act derives its authority primarily from Article 268 and Article 270 of the Constitution:
Article 268 empowers the Union to levy duties of excise on specified goods.
Article 270 mandates the distribution of net proceeds of Union excise duties between Union and states.
The Act operationalizes these constitutional provisions.
7. Contemporary Relevance
Although GST (Goods and Services Tax) has subsumed many indirect taxes, excise duties on certain goods (like petroleum products, alcohol for human consumption, etc.) still remain under the domain of Union or states.
The principles of revenue sharing in the Act influence fiscal arrangements and inter-governmental transfers today.
Summary
The Union Duties of Excise (Distribution) Act, 1979 is a key statute ensuring the fair distribution of excise duty revenues collected by the Union Government among the states. It provides a statutory mechanism respecting the fiscal federalism enshrined in the Constitution, guided by Finance Commission recommendations and equitable principles. The Act helps maintain financial balance between the Union and states, supporting the smooth functioning of governance and development programs.
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