TMI Blog1986 (11) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 1985 part of the said goods was cleared on sale after payment of central excise duty and part of it was sent to certain Texsturising Units for converting the said P.O.Y. into textured Yarn. 3. The petitioner, however, made an application, dated 18/19th December 1984 to the Assistant Collector, Central Excise, Kanpur (respondent no.3) for permission to be granted under Rule 56-B of the Central Excise Rules [hereinafter referred to as the Rules). The ground taken was that the P.O.Y. which was to be sent for textuisation was in the state of semi-finished goods and till the time texturisation of the yarn was complete the excise duty had to be deferred. This had to be so because the petitioner did not possess the facility for texturing the yarn of the unit where the P.O.Y. was manufactured and hence had to remove the P.O.Y. to other units which were engaged in the business of texturing yarn. The Assistant Collector, Central Excise, Kanpur acting on the said representation, granted the said permission vide his letter, dated 8th January, 1985. It was communicated to the petitioner by a letter, dated 9th January, 1985 from the Superintendent, Customs and Central Excise, Kanpur, addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission under rule 56-B was kept in abeyance and the show cause notice was issued to it vide letter, dated 2nd August, 1985 and the petitioner was afforded an opportunity in the matter. In the meantime, the petitioner filed the present writ petition and challenged the aforesaid show cause notice, dated 2nd August, 1985 as well as the earlier order of withdrawal, dated 16th July, 1985. 5. During the pendency of the above writ petition in this Court, under an interim order, dated 19th September, 1985, the Assistant Collector was directed to decide the matter by 1st October, 1985 by a reasoned order. In compliance with the said directions of this Court and after consideration of the entire facts and circumstances of the case, the Assistant Collector, Central Excise, passed a reasoned order, dated 1st October, 1985 under which he cancelled the permission granted under Rule 56-B of the Rules. While doing so, the Assistant Collector held that P.O.Y. is known in trade circles as a distinctively identifiable commodity capable of being bought and sold as such. It is not in the nature of semi-finished goods and P.O.Y. is classifiable under Tariff Item No.18 II of the First Schedule. He furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an aggrieved party, it has jurisdiction to grant relief to such a party if it thinks proper to do so in the circumstances of the case. 8. The other case relied on behalf of the petitioner is of A.V. Venkateswaran v. Ramchand Sobhraj Wadhwani (A.I.R. 1961 (S.C.) 1506). In this case, the petitioner had disabled himself from availing himself of the statutory remedy by his own fault in not doing so within the prescribed time. The Supreme Court held that such a petitioner cannot certainly be permitted to urge that as a ground for the Court dealing with a petition under Article 226 to exercise its discretion in his favour. This authority is, in our opinion, not applicable to the facts of the present case. 9. Shri Ashok Mohiley, learned counsel for the Union of India, has very heavily relied on the case of Titaghar Paper Mills Co. Limited v. State of Orissa and another (A.I.R. 1983 (S.C.) 603) which has been subsequently followed by the Supreme Court in other cases. Their Lordships have laid down in this case that if an Act provides for a complete machinery to challenge an order of assessment, the same can only be challenged by the mode prescribed by the Act and not by a petition un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id order also that has been done is to recall permission temporarily granted to the petitioner under Rule 56-B which was valid upto 7th January, 1986. On the date of the decision of this writ petition even that time upto 7th January 1986 has also expired and now there is no permission under Rule 56-B in existence at present. The question as to whether under the impugned order, dated 1st October, 1985 the temporary permission under Rule 56-B, which was valid only upto 7th January, 1986, could be validly cancelled is now only of academic importance. Hence, also no useful purpose will be served to consider the quashing of order, dated 1st October 1985 and no relief, therefore, can be granted. There is no other relief prayed for in the writ petition. As such, in our opinion, the writ petition deserves to be dismissed. 13. However, despite the above the after hearing Shri Sudhir Chandra for the petitioner and Shri Ashok Mohiley for the Union of India in detail, we propose to deal with the merits of the rival contentions and express our opinion on the same. 14. The first contention raised by the petitioner in the above case is that permission granted on 8th January, 1985 was permanen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly when there is no provision under the Central Excise Act for review. 16. In Assistant Collector of Central Excise Calcutta v. National Tobacco Co. of India Ltd. [A.I.R. 1972 (S.C.) 2563 = 1978 (2) E.L.T. (J 416)(S.C.)] it has been held by the Supreme Court that Rule 10 A of the Central Excise Rules as it stood at the relevant time was residue in nature. It contemplates residuary powers of making a demand in special circumstances not foreseen by the framers of the Act or the Rules. Their Lordships have also held that from the provisions of Section. 4 of the Act read with Rule 10A, there is an implied power to carry out or complete an assessment not specifically provided for by the Rules. Although Rule 10A stood deleted on 1.10.1985, yet we find that in its place Section 11A has been inserted in the Central Excises and Salt Act, 1944 with effect from 17.11.80 to cover the same field. Similar is also the view taken by the Karnataka High Court in Shyam Sunder U. Nichani v. Assistant Collector of Central Excise, Bangalore reported in 1985 (22) Excise Law Times 751. In this case, the said High Court has held that Section 11A of the Central Excises Salt Act, 1944 is not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, we see no reason as to why under the law he cannot, on realising and appraisal of the correct fact that P.O.Y. manufactured by the petitioner is not semi-finished goods, recall that order. In our opinion, if the original permission granted by the Assistant Collector by his order, dated 8th January, 1985 rested on a foundation which was ultimately found to be wrong, it was certainly competent in law for the Assistant Collector, therefore, not to continue with the aforesaid illegal order and to withdraw the same. Mere withdrawal of a wrong order passed earlier, under the circumstances, does not, in our opinion, amount to a review of that order. 19. Learned counsel appearing for the petitioner has submitted that the P.O.Y. are not goods and are also not known as such at common parlance. Let us now examine the settled legal principles which govern as to what is the meaning to be attributed to the word "goods" as used in Section 3(1) of the Act and what is doctrine of common parlance and when it is applicable. 20. Section 3 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) is the charging section. The said section, in so far as it is relevant for our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise decided on 10th day of July, 1986 are noteworthy :- "It is a matter of common experience that the identity of an article is associated with its primary function. It is only logical that it should be so, when a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind." 24. It is cardinal principle of law that the test of common parlance is attracted only when the statute does not contain any definition. In the present case, let us examine as to whether P.O.Y. is included in the definition of any of the excisable articles. For this purpose, we have to refer to the First Schedule of the Act which specifies duties leviable on excise goods. Tariff Item No. 18 to the First Schedule is as under- "Tariff Item 18II (I) ...................... (II) Man-made Filament yarns (i) Non-cellulosic (a) Other than textured (b) textured. Explanation : "Textured Yarn" means yarn that has been processed to introduce crimps, coils, loops or curls alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation that a new and different article must emerge having a distinctive name, character or use. 29. In Union of India and another v. Delhi Cloth and General Mills Co. Ltd. [AIR 1963 S.C. 791 = 1977 (1) E.L.T. (J 199)], it has been held as under :- "Excise duty is on the manufacture of goods and not on the sale, Mr. Pathak is, therefore, right in his contention that the fact that the substance produced by them at an intermediate stage is not put in the market would not make any difference. If from the raw material, has been brought into existence a new substance by the application of process one or more of which are with the aid of power and that substance is the same as refined oil" as known to the market an excise duty may be leviable under Item 23 (the present Item 12)". 30. In M.R.F. Ltd. v. Union of India and Others - 1985 (22) Excise Law Times 5, the Bombay High Court has also taken the view that rubber rising of the warp sheets amounts to manufacture as a new product comes into existence and constitute a complete and independent product and that marketability is no consideration for liability to excise duty. The fact that the rubberised type cord warp sheets are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e market as goods and is saleable as such. It is thus a manufactured product which attracts excise duty. 34. Further, in paragraph 18 of the writ petition, as already extracted above, it is admitted to the petitioner that P.O.Y. when sold without texturisation to consumers is excisable under Tariff Item No 18II(i)(a). Hence, at any rate, since duty is on manufacture and not on sale so P.O.Y. even if not actually sold as a result of manufacture, it will make no difference to its excisability if it is covered by the description in the tariff as aforesaid [See Union of India v. Delhi Cloth and General Mills (Supra)]. 35. The next contention urged on behalf of the petitioner is that Rule 56-B is applicable to the case of the petitioner and the duty is liable to be deferred till the P.O.Y. is texturised. This contention has no merit as we have already held above that Rule 56-B is not applicable to the case of the petitioner. The said Rule applies only to the case of semifinished goods. Hence, duty on P.O.Y. is not liable to be deferred till the stage of texturisation. 36. The other submission made by Sri Sudhir Chandra that circular of 1980 issued in regard to P.O.Y. is applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been refunded but which would have been collected or, as the case may be would not have been refunded, if the amendments referred to in Sub-section (1) had been in force at all material times." 37. The affect of this amendment was two-fold. Firstly, that excise duty was to be charged even in respect of clearance within the factory of manufacture until and unless such removal was covered by the third proviso to Rule 9(1) sub clause (1) of Rule 49. At present, Tariff Item No. 18 of the Central Excise Tariff is not notified under Rule 56-A of the Rules. Since the duty payable on texturised and non-texturised yarn is the same, as such untextured yarn must discharge central excise duty before it is taken for texturing purposes. Secondly, the said rule as amended by the Finance Act, 1982 has the effect of nullifying any decision, order or guidelines which are inconsistent with the amended provisions of Rules 9 and 49. Thus, in our opinion, the contention raised on behalf of the petitioner that the controversy is covered by the earlier departmental circular of Sept., 1980 and the said circular has binding effect is not tanable. It is further held that under the amended Rules 9 and 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission regarding device to defer duty, he also relies on the well known case of M/s Mc Dowell and Company Ltd. v. Commercial Tax officer, Secunderabad (1985) U.P. Tax Cases 747. True it is that as held by the Supreme Court in the Mc Dowell's case (supra) that it is upto the court to take stock to determine the nature of the new and sophisticated legal device to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction but the fact remains that in the present case it is the Central Excise department itself which was virtually inveigled into a trap by the petitioner suggesting erroneously that P.O.Y. is semi-finished goods and it is entitled to permission under Rule 56-B with the object of getting the benefit of deferment of excise duty every day to the extent of Rs. 10 lacs, and for at least six weeks or more as already stated above. That may be so but we will rest ourselves by observing that although at times Industrial magnates may devise ways and means to delay and defer payment of legitimate heavy taxes and duties yet such an attempt is likely to succeed only till the time the case is finally decided by the court and for that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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