Delhi High Court To Decide Constitutional Validity Of Cess On Pan Masala Manufacturers

The Division Bench of Justices Anil Kshetarpal and Shail Jain has listed for final disposal two petitions filed by Dharampal Satyapal Ltd. and the Smokeless Tobacco Association challenging the levy of compensation cess on pan masala and its constitutional validity.

The matters will be heard on September 24.

The Court also noted that a Single Judge of the Karnataka High Court had quashed the impugned notifications. It recorded that the Government has already preferred an appeal against the Karnataka High Court's judgment before a Division Bench, which is pending.

The Karnataka High Court had recently struck down the manner in which the Health Security se National Security Cess Act, 2025 and the Rules imposed the levy on pan masala manufacturers.

While upholding the Union's power to enact a law for levy of cess, the Karnataka High Court held that the levy based on the assumed production capacity of machines, instead of the actual quantity manufactured, was unreasonable and violative of Article 14 of the Constitution.

The Health Security se National Security Cess Act, 2025 was enacted to augment resources for meeting expenditure on national security and public health. The cess is levied on machines installed or processes undertaken for the manufacture or production of specified goods, including pan masala.

The Act stipulates a minimum penalty of Rs. 10,000 or an amount equal to the cess evaded or fraudulently claimed, whichever is higher. It also states that Persons aiding or abetting such offences may face penalties up to Rs. 1,00,000.

For Petitioners: Advocates Payal Chawla, Ms. Snigdha Dash and Mr. Karthik Sundaram, Advs.

For Respondents: Vivek Sharma, SPC. Anushree Narain, SSC along with Apurv Yadav and Naman Choula, Vinak Kaushik, GP.