1981 (2) TMI 230 - HC - Central Excise

Summary

Issues Involved:
1. Classification of asphaltic roofing sheets under Central Excise Tariff Item 17(4).
2. Entitlement to a permanent injunction restraining the defendants from levying or collecting excise duty on roofing sheets.
3. Legality of the show cause notice dated 13-2-1978.
4. Timeliness of the defendants' claim for excise duty.
5. Reliefs to which the plaintiff is entitled.

Issue-wise Detailed Analysis:

1. Classification of Asphaltic Roofing Sheets under Central Excise Tariff Item 17(4):
The primary issue was whether asphaltic roofing sheets manufactured by the plaintiff fall under Tariff Item 17(4) of the Central Excises and Salt Act. The court examined the manufacturing process, which involved converting waste paper into fibrous mats, corrugating them, and impregnating them with asphalt. The court noted that the raw material was paper and that the final product contained a significant amount of asphalt. Despite the transformation, the court held that the product remained a paper product, thus falling under Tariff Item 17(4). The court also referenced a Government notification exempting asphaltic roofing sheets from duty, which implied that the Government considered them under Tariff Item 17(4).

2. Entitlement to a Permanent Injunction Restraining the Defendants from Levying or Collecting Excise Duty on Roofing Sheets:
The plaintiff sought a permanent injunction to prevent the defendants from levying or collecting excise duty on roofing sheets cleared before 9-2-1976. The court found that the show cause notice issued by the defendants was not preceded by proper classification and was barred by limitation. Consequently, the court granted the permanent injunction, restraining the defendants from proceeding with the enquiry or taking any steps based on the impugned show cause notice.

3. Legality of the Show Cause Notice Dated 13-2-1978:
The court examined the legality of the show cause notice issued on 13-2-1978. The plaintiff argued that the notice was issued without jurisdiction, was barred by limitation, and was mala fide. The court found that previous show cause notices related to intermediary products and not the final product. The court held that the show cause notice dated 13-2-1978 was illegal, void, and barred by limitation, as it was not issued within the prescribed period under Rule 10 of the Central Excise Rules.

4. Timeliness of the Defendants' Claim for Excise Duty:
The court addressed whether the defendants' claim for excise duty was timely. The relevant Rule 10 of the Central Excise Rules allowed for a recovery period of six months from the date of short levy. The court found that the show cause notice dated 13-2-1978 was issued well beyond this period and was, therefore, barred by limitation. The court rejected the defendants' argument that the notice could be deemed issued under Rule 10-A, which had been declared ultra vires by previous court decisions.

5. Reliefs to Which the Plaintiff is Entitled:
The court concluded that the plaintiff was entitled to the reliefs sought. The court decreed:
- A declaration that the show cause notice dated 13-2-1978 was illegal, void, and barred by limitation.
- A permanent injunction restraining the first defendant from proceeding with the enquiry or taking any steps based on the show cause notice.

Conclusion:
The court ruled in favor of the plaintiff, granting the declarations and injunctions sought. The writ petition was also allowed, emphasizing that the show cause notice was issued without jurisdiction and was barred by limitation. The court's decision underscores the importance of adhering to procedural requirements and limitations in administrative actions.