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1991 (7) TMI 97
The High Court directed the respondents to recalculate duty demand and grant refund to the petitioner based on the order of the Customs, Excise and Gold (Control) Appellate Tribunal. The Court rejected the Department's argument for appeal filing and ordered the refund with 18% interest. The writ petition was allowed with no costs.
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1991 (7) TMI 96
Issues:
Classification of product as non-excisable, rejection of refund claims as time-barred and inadmissible, entitlement to refund under protest, compliance with procedural rules for refund, application of limitation for refund claims, denial of refund on the doctrine of unjust enrichment.
Classification of Product:
The petitioner, a manufacturing unit, undertook job work of re-engraving on second-hand rollers and filed a classification list to classify the product as non-excisable. The Assistant Collector initially accepted the claim, but later directed clearance of the product as excisable under a new tariff. The appellate authority allowed the petitioner's appeal, holding that the work undertaken does not amount to manufacture, and the product is non-excisable.
Rejection of Refund Claims:
The petitioner filed refund claims for the period post the appellate authority's decision, totaling Rs. 5,59,301. The Assistant Collector rejected the claims as time-barred and inadmissible, citing Section 11B of the Central Excises and Salt Act. The petitioner contended that the limitation does not apply as the duty was paid under protest and relied on precedents to support the claim for refund.
Entitlement to Refund Under Protest:
The Assistant Collector rejected the refund claims, arguing that the duty was not paid under protest during the pendency of the appeal. However, the High Court found merit in the petitioner's submission that a letter clearly indicated the intention to pay duty under protest, even though specific phraseology was absent. The Court held that the petitioner effectively communicated the protest to the Department.
Compliance with Procedural Rules for Refund:
The Assistant Collector contended that the petitioner failed to comply with Rule 233B of the Central Excise Rules regarding duty paid under protest. The High Court found no merit in this argument, stating that the substantive right to refund arises from the appellate authority's order, and procedural lapses do not disentitle the taxpayer from recovering the duty paid.
Application of Limitation for Refund Claims:
The High Court emphasized that the limitation under Section 11B does not apply when seeking a refund following an order by an appellate or revisional authority. Refund claims cannot be denied based on limitation when the appellate authority sets aside the original order. Precedents were cited to support this interpretation.
Denial of Refund on Unjust Enrichment:
The Assistant Collector attempted to deny the refund on the doctrine of unjust enrichment, arguing that the duty was not passed on to customers. The High Court dismissed this argument, stating that duty was paid under protest, and the petitioner was entitled to a refund based on the appellate authority's decision. The Court ruled in favor of the petitioner, directing the respondents to grant the refund with interest and costs.
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1991 (7) TMI 95
Issues Involved:
1. Classification of rotors and stators u/s Tariff Item No. 30 or Tariff Item No. 51A.
2. Relevance of personal observations and pamphlets in classification.
3. Consideration of trade understanding and affidavits in classification.
4. Applicability of trade meaning versus statutory definition in classification.
Summary:
1. Classification of Rotors and Stators:
The petitioner, a company manufacturing electrically operated hand tools, classified rotors and stators as parts of electric motors under Tariff Item No. 30 for several years. In May 1978, the company claimed these should be classified under Tariff Item No. 51A as power tools. The Assistant Collector, Appellate Collector, and Central Government rejected this claim, maintaining the classification under Tariff Item No. 30. The company challenged these decisions u/s Article 226 of the Constitution of India.
2. Relevance of Personal Observations and Pamphlets:
The petitioner argued that the Assistant Collector erred by relying on personal observations made during a factory visit. The court held that while personal observations alone cannot determine classification, the Assistant Collector considered various circumstances, including test charts and pamphlets, which were relevant. The court found no error in considering pamphlets as one of the relevant circumstances for classification.
3. Consideration of Trade Understanding and Affidavits:
The petitioner contended that the authorities ignored affidavits from dealers and experts, which indicated that the goods were not known as electric motors in trade. The court noted that these affidavits were produced at a late stage and were not before the Assistant Collector. The revisional authority was not bound to consider new evidence presented for the first time in revision. The court found the affidavits unconvincing and sponsored by the company, thus not reliable for determining classification.
4. Applicability of Trade Meaning versus Statutory Definition:
The court emphasized that when the statutory definition is clear, trade meaning or commercial nomenclature should not be considered. Referring to the Supreme Court decision in Akbar Badruddin Jiwani v. Collector of Customs, the court held that the words in Tariff Item No. 30 were clear and unambiguous. Therefore, the authorities were justified in ignoring trade understanding. The court concluded that the classification under Tariff Item No. 30 was correct and declined to exercise writ jurisdiction to disturb the concurrent findings of the authorities.
Conclusion:
The court discharged the rule with costs, affirming the classification of the disputed items under Tariff Item No. 30.
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1991 (7) TMI 94
Issues Involved:
1. Freight & Transportation charges for specific months.
2. Bonus to dealers.
3. Commission to agents.
4. Secondary packing.
5. Interest on security deposits from dealers and agents.
6. Interest on dealers' deposits against direct despatches.
7. Interest and bank charges on drafts.
Detailed Analysis:
(i) Freight & Transportation:
The claim for abatement on freight and transportation charges for the months of July and August 1981 and April and July 1982 was disallowed by the Assistant Collector due to the absence of the endorsement "duty paid under protest" on gate-passes, as required by Rule 233B. However, the court found that the duty was indeed paid under protest, supported by a covering letter, and thus rejected the Assistant Collector's ground for disallowance. The court concluded that the assessee is entitled to claim abatement for these months.
(ii) Bonus to Dealers:
The Assistant Collector disallowed the deduction for bonus to dealers, stating it was not ascertainable at the time of removal of goods and was incurred post-delivery. The court, however, accepted the assessee's argument that the bonus is a trade discount ascertainable prior to the removal of goods, as established by trade practice. The court referenced its own decision in a similar case (Advani-Oerlikon Limited) and the Supreme Court's decision in Bombay Tyre International. The matter was remanded back to the Assistant Collector for quantification after verification.
(iii) Commission to Agents:
Similar to the bonus to dealers, the commission to agents was disallowed by the Assistant Collector on the grounds that it was not ascertainable at the time of removal. The court disagreed, noting that the commission was part of the agency agreement and ascertainable prior to the removal of goods. The court remanded the matter back for quantification subject to verification.
(iv) Secondary Packing:
The claim for secondary packing expenses was disallowed due to lack of specific evidence from the assessee. The Assistant Collector noted that the assessee failed to provide details on whether special packing was requested by specific buyers. The court upheld this finding, stating that the assessee did not substantiate the claim with necessary material, making it a pure finding of fact that cannot be disturbed.
(v) Interest on Security Deposits from Dealers and Agents:
The claim was disallowed on the grounds that the deposits were used as working capital. The court referenced a Division Bench decision in Britannia Industries Ltd., which supports the rejection of this claim. Therefore, the court confirmed the disallowance.
(vi) Interest on Dealers' Deposits against Direct Despatches:
This claim was similarly disallowed, with the court again referencing the Britannia Industries Ltd. decision. The court confirmed the disallowance, agreeing that such interest does not qualify for deduction as it is part of the working capital.
(vii) Interest and Bank Charges on Drafts:
The claim for interest and bank charges on drafts was disallowed by the Assistant Collector, stating these expenses were incurred post-delivery and contributed to the value and marketability of the goods. The court disagreed, noting that these expenses are post-manufacturing and deductible under Section 4 of the Central Excises and Salt Act, 1944. The matter was remanded back for verification of the deductible amount.
Conclusion:
The court set aside the Assistant Collector's orders partially, confirming the rejection of claims for secondary packing, interest on security deposits from dealers and agents, and interest on dealers' deposits against direct despatches. The matters of freight and transportation charges, bonus to dealers, commission to agents, and interest and bank charges on drafts were remanded back for recalculating permissible deductions. The Assistant Collector was directed to reconsider these issues in light of the court's observations. The rule was made partly absolute with no order as to costs.
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1991 (7) TMI 93
Issues Involved:
1. Applicability of Exemption Notifications dated June 1, 1971, and February 27, 1980, to phenolic moulding powder.
2. Determination of whether the transformation of phenolic formaldehyde resin into phenolic moulding powder constitutes 'manufacture'.
3. Legality of the excise duty levied and collected on phenolic moulding powder.
4. Entitlement to a refund of excise duty paid from 1962 onwards.
5. Consideration of the doctrine of unjust enrichment in the context of refund claims.
Detailed Analysis:
1. Applicability of Exemption Notifications:
The petitioners claimed that the manufacture of phenolic moulding powder fell within Item 3 read with Explanation III of the Notification dated June 1, 1971, which reduced the duty to 20% ad valorem. Despite this, the Department levied and recovered duty at 40% ad valorem as prescribed under Item 15A of the First Schedule. The petitioners challenged this through Writ Petition No. 413 of 1975, which was allowed, and the Department was directed to refund the excess duty paid. However, the subsequent Notification No. 7/80 issued on February 27, 1980, was not considered in the initial judgment.
2. Transformation of Phenolic Formaldehyde Resin into Phenolic Moulding Powder:
The Department initially held that the products manufactured by the Company were not covered under the Exemption Notifications and were liable to pay excise duty at the tariff rate. However, a circular issued on May 5, 1982, by the Central Board of Excise and Customs, based on the opinion of the Chief Chemist, stated that the transformation of phenolic formaldehyde resin into phenolic moulding powder did not amount to manufacture. This was confirmed by the Government of India on October 6, 1982, which declared that no further duty of excise could be levied on phenolic moulding powder.
3. Legality of the Excise Duty Levied:
The Court found that the duty paid by the Company and recovered by the Department was under a mutual mistake of fact and law, as the transformation of phenolic resin into phenolic moulding powder did not constitute manufacture. Consequently, the recovery of duty by the Department from 1962 onwards was without authority of law.
4. Entitlement to Refund:
The Court referred to the Supreme Court's decision in Salonah Tea Company Ltd. v. Superintendent of Taxes, which held that taxes collected without authority of law should be refunded. The Court found that the mutual mistake became known only in 1982, and thus, the Company was entitled to a refund of the duty paid from 1962 onwards. The Court rejected the argument that the refund should be limited to a period of three years prior to the date of knowledge of the mistake, as the recovery was without jurisdiction.
5. Doctrine of Unjust Enrichment:
The Department argued that the refund should be denied based on the doctrine of unjust enrichment, claiming that the excise duty was passed on to consumers. The Court, however, found no evidence in the Department's affidavit to support this claim. The Full Bench of the Court had previously held that the burden of tax being passed on to consumers should not be presumed without evidence. Thus, the Court rejected the unjust enrichment argument and declared that the Department was liable to refund the duty wrongfully recovered.
Conclusion:
The petition succeeded, and it was declared that the process of manufacturing phenolic moulding powder from phenolic resin was not liable to payment of excise duty. The petitioner Company was entitled to claim a refund of duty paid from 1962 onwards. The Department was directed to allow the refund after proper verification and without raising objections of limitation under Section 11B of the Act. The order dated September 7, 1981, and any other adverse orders were vacated, and the Bank guarantees furnished by the petitioners were discharged. The rule was made absolute with no order as to costs.
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1991 (7) TMI 92
Issues involved: Interpretation of "duty of customs" u/s 25(1) of the Customs Act, 1962 and loading of landing charges in determining customs duty.
Interpretation of "duty of customs": The petitioners argued that "duty of customs" includes basic customs duty, additional, and auxiliary duty. However, the court, following previous judgments, held that "duty of customs" covers only basic customs duty, not additional or auxiliary duty. A Special Leave Petition filed against a similar judgment of the Kerala High Court was dismissed by the Supreme Court, affirming this interpretation.
Loading of landing charges: The petitioners contended that landing charges should not be included in the assessable value of imported goods for customs duty calculation. This argument was dismissed based on a Division Bench judgment in Ashok Traders v. Union of India, 1987 (32) E.L.T. 262. The petitioners were allowed to argue that only actual charges paid to the Port Trust, not an arbitrary percentage, should be considered if appeals against CEGAT orders are unsuccessful.
Final Decision: The petition was dismissed with no order as to costs. The petitioners were permitted to pay the amounts due for additional and auxiliary duty exemptions by a specified date, with interest if ordered, and were required to maintain bank guarantees until payment. The Prothonotary was directed to act on the minutes of the court.
This summary provides a detailed breakdown of the judgment, addressing each issue involved and the court's decision on each point.
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1991 (7) TMI 91
Issues:
1. Refund of excise duty paid under protest for the years 1978-79 to 1990-91.
2. Delay in refund despite Tribunal's order in favor of the petitioner.
3. Dispute over the classification of manufactured bars as flats for excise duty.
4. Lack of justification by the respondents for not refunding the amount.
5. Argument by respondents that duty may have been passed on to consumers.
6. Legal obligation of authorities to refund illegally recovered excise duty.
Analysis:
1. The petitioner, engaged in manufacturing iron and steel products, paid excise duty under protest amounting to Rs. 77,98,212.89 for the years 1978-79 to 1990-91. The petitioner sought a refund of this amount along with interest at 15% through a writ petition.
2. Despite the Tribunal's acceptance of the petitioner's revision petition and the subsequent order in favor of the petitioner dated July 14, 1986, the respondents failed to refund the excise duty paid. The petitioner pursued legal remedies promptly, and the respondents did not obtain a stay order against the refund.
3. The dispute arose from the classification of bars manufactured by the petitioner, which were considered as flats for excise duty purposes. The Tribunal's order clarified the classification, supporting the petitioner's claim that the bars should be assessed under a specific tariff item.
4. The respondents, in their reply, failed to provide a valid justification for not refunding the excise duty to the petitioner. The petitioner's claim was substantiated by legal proceedings and the Tribunal's decision, indicating the illegality of the recoveries made by the department.
5. The respondents argued that the petitioner might have passed on the burden of excise duty to consumers. However, this argument was not supported by evidence or mentioned in the written statement, making it inappropriate to consider without proper pleading.
6. The judgment highlighted the legal obligation of authorities to refund illegally recovered excise duty promptly and without causing undue harassment to the petitioner. The court directed the respondents to refund the excise duty paid by the petitioner within two months, failing which interest at 12% would be applicable.
This detailed analysis of the judgment emphasizes the issues involved, the legal arguments presented by both parties, and the court's decision based on the facts and legal principles outlined in the case.
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1991 (7) TMI 90
Issues:
1. Conviction under Customs Act and Gold (Control) Act
2. Entitlement to set off under Sec. 428 of the Cr. P.C.
Analysis:
1. The revision petitioners were charged under Section 135(l)(i) of the Customs Act and Sec. 85(l)(a) of the Gold (Control) Act. They were found guilty by the trial Court, convicted, and sentenced to rigorous imprisonment for one year for each offense, along with a fine. The appeal to the Sessions Court was dismissed, confirming the conviction and sentence.
2. The main issue in this revision was whether the revision petitioners were entitled to set off under Sec. 428 of the Cr. P.C. for the period they were detained under COFEPOSA. The revision petitioners were detained in the Central Prison from 19-6-1984 to 19-6-1985 during the investigation of the customs case. The defense argued that this period of detention should be considered for set off. The prosecution contended that the period under COFEPOSA cannot be set off against the term of imprisonment imposed.
3. The Court considered the provisions of Sec. 428 of the Cr. P.C., which allow for the set off of the period of detention undergone during investigation, inquiry, or trial before conviction. As the revision petitioners were under detention during the investigation period of the customs case, the Court held that they were entitled to set off for the period 19-6-1984 to 19-6-1985. This decision was based on the fact that the revision petitioners were arrested on 5-5-1984 and were under detention during the investigation period.
4. The Court referred to a letter from the Addl. Chief Judicial Magistrate confirming that the revision petitioners were undertrial prisoners during their detention under COFEPOSA. The defense also relied on a previous decision of the Court where a similar request for set off was allowed. The Central Govt. Pleader argued against allowing the set off for the period of detention under COFEPOSA.
5. In conclusion, the Court dismissed the Criminal Revision Petition but held that the revision petitioners were entitled to set off for the period 19-6-1984 to 19-6-1985. The decision was based on the provisions of Sec. 428 of the Cr. P.C. and the circumstances of the case where the revision petitioners were under detention during the investigation period of the customs case.
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1991 (7) TMI 89
Issues:
1. False declaration made in a Writ Petition under Article 226 of the Constitution of India.
2. Attempt to seek relief by intentionally making false statements on oath.
3. Abuse of the process of the Court.
4. Prosecution under Sections 193, 196, 199, and 200 of the Indian Penal Code.
Analysis:
The judgment involves the dismissal of a Writ Petition filed under Article 226 of the Constitution of India due to the petitioner, a Director of a Private Limited Company, making a false declaration in Paragraph 15 of the petition. The petition sought a refund of additional duty on imported goods, claiming the levy was illegal based on a previous court judgment. The respondents pointed out a prior Writ Petition filed by the petitioners seeking a similar refund, which was dismissed for being filed more than three years after the discovery of the mistake. The Court found that the present petition was an attempt to snatch orders from the Court by knowingly making a false statement on oath. The petitioner admitted to the false declaration, attributing it to his poor health and inadvertence by his advocate. The Court rejected the apology and held that the petitioners abused the court process, bringing the administration of justice into disrepute.
The Court directed the Prothonotary and Senior Master to file prosecution against the petitioner for committing an offense punishable under various sections of the Indian Penal Code. The Court summarily dismissed the petition, stating that the petitioners disentitled themselves from seeking relief under Article 226 due to their conduct. Additionally, the Court ordered the companion Writ Petition, where the petitioner made a similar false declaration, to be kept under seal and included in the prosecution complaint. The judgment highlights the seriousness of intentionally making false statements in legal proceedings and the consequences of abusing the court process.
In conclusion, the judgment emphasizes the importance of truthfulness in legal proceedings and the severe repercussions of intentionally making false declarations on oath. The Court's decision to dismiss the petition and initiate prosecution against the petitioner serves as a deterrent against abusing the judicial process and maintaining the integrity of the legal system.
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1991 (7) TMI 88
Issues:
1. Interpretation of provisions regarding countervailing duty and additional duty of excise.
2. Whether exemption notifications affect the levy of countervailing duty and additional duty of excise.
3. Scope of the term "duty of excise" in relation to special excise duty and additional duty of excise.
Analysis:
The judgment by the High Court of Bombay involved the interpretation of provisions concerning countervailing duty and additional duty of excise. The petitioner, a Private Limited Company engaged in manufacturing synthetic fabrics, challenged the imposition of additional duties under the Tariff Act. The court examined the applicability of countervailing duty under Section 3 of the Customs Tariff Act, which is equivalent to the excise duty on similar domestically manufactured goods. It was argued that special excise duty and additional duty of excise are part of the excise duty leviable under the Excise Act and are subject to exemption notifications. However, the court held that countervailing duty and additional duty of excise can be levied irrespective of exemption notifications, as these duties are based on the concept of levy and not just collection.
Regarding the impact of exemption notifications on the levy of duties, the court rejected the petitioner's argument that if an exemption from excise duty is granted domestically, countervailing duty and additional duty of excise cannot be imposed on imported goods. The court clarified that exemption notifications do not eliminate the liability to pay duties but only exempt the manufacturer from payment. The distinction between levy and collection of duty was emphasized to refute the petitioner's contention that exemption notifications prevent the imposition of countervailing duty and additional duty of excise.
The court also addressed the scope of the term "duty of excise" concerning special excise duty and additional duty of excise. The petitioner argued that these additional duties should not be included in the term "duty of excise," citing a Supreme Court decision. However, the court disagreed with this interpretation, stating that the levy of countervailing duty and additional duty of excise under the relevant Act was valid. The court concluded that the petitioners were not entitled to relief, and the petition was dismissed with costs, upholding the imposition of countervailing duty and additional duty of excise as per the statutory provisions.
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1991 (7) TMI 87
Issues Involved:
1. Exclusion of post-manufacturing expenses from assessable value.
2. Legality of the show cause notice demanding short-levied excise duty.
3. Deductibility of maintenance charges and site service charges from assessable value.
Summary:
1. Exclusion of Post-Manufacturing Expenses:
The petitioner company, engaged in manufacturing air-conditioners, water coolers, and refrigerators, filed new price lists excluding post-manufacturing expenses based on judicial decisions. The Assistant Collector, however, approved the price lists without allowing deductions for post-manufacturing expenses. The company challenged this decision in Writ Petition No. 189 of 1981.
2. Legality of Show Cause Notice:
The company received a show cause notice demanding Rs. 26,97,937.83 for short-levied excise duty for the period from May 19, 1980, to January 2, 1981. The company paid Rs. 6,05,800.84 under protest and filed Writ Petition No. 211 of 1981 to quash the notice and seek a declaration that post-manufacturing expenses should not be included in the assessable value.
3. Deductibility of Maintenance Charges and Site Service Charges:
The Assistant Collector allowed deductions for additional tax on sales tax but disallowed deductions for maintenance charges and site service charges, considering them as after-sales services promoting marketability. The company argued that maintenance service contracts are optional and distinct from warranty obligations, and thus should not be included in the assessable value. The court agreed, noting that maintenance services are optional and distinct from warranty services. Similarly, site service charges, which include design assistance and installation inspection, are independent of warranty obligations and should also be excluded from the assessable value.
Conclusion:
The court declared that the revised price lists filed by the company should have been approved after allowing deductions for additional tax on sales tax, maintenance charges, and site service charges. The Assistant Collector's order was set aside, and the Assistant Collector was directed to take consequential steps to give effect to this judgment. The bank guarantees furnished by the petitioners were ordered to be discharged.
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1991 (7) TMI 86
Issues:
- Claim for deductions on account of post-manufacturing expenses for six items.
- Admissibility of deductions for special packing expenses.
- Admissibility of deductions for carriage forward charges.
- Claim for selling agency commission deduction.
- Claim for interest on credit to customers deduction.
- Claim for aging expenses deduction.
Analysis:
The judgment involves a company manufacturing aluminum products seeking deductions for post-manufacturing expenses. The company filed a price list claiming deductions for various items, which were initially rejected. The company filed a writ petition, and after subsequent orders, the matter was heard again. The court considered the admissibility of deductions claimed under six headings, including special packing expenses, carriage forward charges, selling agency commission, interest on credit to customers, and aging expenses.
The court first addressed the claim for special packing expenses. The company argued that special packing was necessary due to the sensitive nature of the products. However, the court found that such packing was a normal practice to avoid damage, making it ineligible for deduction as a post-manufacturing expense.
Regarding carriage forward charges, the company claimed these as transport costs for goods delivered to customers. The court noted that the pricing terms were "Ex-works," indicating that transportation costs were included in the sale price. As a result, the company could not claim deductions for carriage forward charges as post-manufacturing expenses.
The claim for selling agency commission deduction was conceded by the company's counsel, acknowledging its lack of merit. The court rejected the claim for interest on credit to customers deduction, stating that interest losses due to delayed payments could not be excluded from the assessable value of goods sold.
Lastly, the court considered the aging expenses deduction claim. The company argued that aging processes added value to the products. However, the court found that aging was part of the manufacturing process just before packing and forwarding, making it ineligible for deduction as a post-manufacturing expense.
Ultimately, the court upheld the impugned order, dismissing the petition with costs as none of the contentions raised by the company were found to have merit.
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1991 (7) TMI 85
Issues Involved:
1. Applicability and duration of exemption notifications under Section 25(1) of the Customs Act, 1962.
2. Hostile discrimination between private importers and MMTC under Section 25(2) of the Customs Act, 1962.
3. Validity of the special exemption notification under Section 25(2) of the Customs Act, 1962.
Detailed Analysis:
Issue 1: Applicability and Duration of Exemption Notifications under Section 25(1) of the Customs Act, 1962
The appellants used aluminium ingots for manufacturing various aluminium products, which they purchased locally and imported. On 18th April 1980, the Central Government issued a notification under Section 25(1) of the Customs Act, 1962, exempting aluminium ingots from the whole of the basic customs duty and additional duty. This notification was valid until 30th September 1980. Subsequent notifications on 29th August 1980 and 9th September 1980 modified the duty exemptions. The appellants argued that the exemption notification dated 18th April 1980 continued to remain in force until 30th September 1980. However, this plea was given up during the hearing.
Issue 2: Hostile Discrimination Between Private Importers and MMTC under Section 25(2) of the Customs Act, 1962
The appellants contended that the exemption granted to MMTC under Section 25(2) of the Customs Act, 1962, constituted hostile discrimination. They argued that both the appellants and MMTC were similarly situated as importers of aluminium ingots and rods, and any favorable treatment accorded to MMTC was discriminatory, arbitrary, and without legal authority. They claimed that MMTC, which did not pay additional duty, could sell aluminium ingots at lower prices, resulting in hostile discrimination against users who did not purchase from MMTC, violating Article 14 of the Constitution of India.
Issue 3: Validity of the Special Exemption Notification under Section 25(2) of the Customs Act, 1962
The appellants challenged the validity of the special exemption notification issued on 2nd December 1980 under Section 25(2) of the Customs Act, 1962, which exempted 30,639 tonnes of aluminium ingots imported by MMTC from additional duty. They argued that Section 25(2) did not permit the grant of exemption to any particular importer and that the exemption had to pass the test of Article 14 of the Constitution. The appellants submitted that the reasons stated in the notification did not justify the differential treatment between MMTC and private importers. The court noted that the reasons given in the notification suggested a general exemption for aluminium due to a shortage in the country, but no affidavit or material was provided by the respondents to justify the discrimination.
Judgment:
The court, referencing the Supreme Court's affirmation of the Delhi High Court's judgment in M. Jahangir Bhatusha's case, observed that the power conferred on the Central Government under Section 25(2) was to be exercised with subjective satisfaction based on circumstances of an exceptional nature. The court found that the reasons set forth in the exemption notifications in M. Jahangir Bhatusha's case constituted a reasonable basis for the same, emphasizing the need to protect domestic prices and ensure sufficient supplies.
However, the court acknowledged that there appeared to be some substance in the appellants' contention that no good reason had been made out for treating private importers differently from MMTC. Despite this, the court concluded that it could not convert a special exemption notification under Section 25(2) into a general notification under Section 25(1). Furthermore, the court could not strike down the notification as it would adversely affect MMTC, which was not a party to the appeals.
Conclusion:
The appeals were dismissed without any order as to costs. The interim orders restraining the respondents from enforcing bank guarantees furnished by the appellants would remain in operation for four weeks from the date of the judgment.
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1991 (7) TMI 84
The High Court of Bombay dismissed the petition filed by a company importing copper scrap, as the challenge to the levy of additional customs duty was not valid based on a previous Supreme Court decision. The petitioners were not entitled to any relief, and the rule was discharged with costs. The respondents were allowed to enforce bank guarantees and personal bonds furnished by the petitioners. (Case Citation: 1991 (7) TMI 84 - High Court of Judicature at Bombay)
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1991 (7) TMI 83
Issues: Challenge to legality of excise duty order for manufacture of "Hot Mix Asphalt" without requisite licenses.
Analysis:
1. The petitioners, a partnership firm engaged in road construction, challenged an excise duty order for manufacturing "Hot Mix Asphalt" without necessary licenses. The asphalt mix was used for captive consumption in road construction activities, not for sale in the market. The process involved drying small stones with bitumen at high temperature to create a mix for road construction.
2. The Collector of Central Excise alleged that the petitioners conducted manufacturing activities without proper licenses and failed to pay excise duty for the asphalt mix. Despite a previous order in favor of the petitioners stating that asphalt mix is not liable for excise duty, the Collector proceeded to impose duty, leading to the current challenge.
3. The Court, upon review, found the impugned order unsustainable. It questioned the Collector's authority to overturn a previous decision by his predecessor. The Court disagreed with the Collector's interpretation that the process of preparing asphalt mix constituted manufacturing under Section 2(f) of the Central Excise Act. The Court examined the process in detail and concluded that the petitioners were not manufacturing goods subject to excise duty under the Central Excise Tariff.
4. Consequently, the Court quashed the impugned order dated December 17, 1983, absolving the petitioners from the liability to pay excise duty for the preparation of asphalt mix. No costs were awarded in this matter.
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1991 (7) TMI 82
Issues:
Interpretation of Import General Manifest - Short-landing of pallets - Imposition of penalty on agents of foreign flag vessel.
Analysis:
The judgment delivered by the High Court of Judicature at Bombay involved a dispute regarding the imposition of a penalty on the petitioners, who were agents of a foreign flag vessel. The petitioners had filed an Import General Manifest in July 1984, declaring the contents of three containers brought by the vessel to Bombay. The vessel discharged the containers with their seals intact at the Bombay Port Trust Docks and then sailed from Bombay. However, the respondents alleged that three pallets were short-landed based on the out-turn report of the port trust.
The petitioners received a show cause notice regarding the alleged short-landing and responded by stating that the containers were discharged with their seals intact, thus contesting the imposition of the penalty. Despite the petitioners' explanation, respondent No. 1 imposed a penalty after finding that the containers landed with seals intact as per the tally sheets provided by the petitioners. The petitioners appealed the decision, but both the appellate authority and the revisional authority upheld the penalty.
In the judgment, it was highlighted that the appellate and revisional authorities made erroneous observations to justify imposing the penalty. The court noted that the seals being rusted and the seal numbers not being visible did not necessarily mean that the containers did not land with seals intact. Additionally, the destuffing tally sheets indicated that the full contents of the containers were destuffed, even though some pallets were lost in the port area. The court agreed with the petitioners' argument that the penalty should not be levied based on assumptions about the seals' integrity.
Ultimately, the court ruled in favor of the petitioners, finding that the penalty imposed by respondent No. 1 and upheld by the appellate and revisional authorities could not be sustained. The court made the rule absolute in favor of the petitioners, with no order as to costs.
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1991 (7) TMI 81
Issues:
1. Inclusion of expenses after import in customs duty calculation
2. Levying countervailing duty on imported goods
3. Validity of circular issued by Central Board of Excise and Customs
4. Entitlement to refund of countervailing duty
Analysis:
1. The petitioners, a company engaged in importing chemicals, contested the customs authorities' practice of including post-import expenses in customs duty calculation. The company imported 2-Ethylhexanol and filed Bills of Entry for clearance, arguing that such expenses should not be included. The customs authorities, however, insisted on including customs duty in the assessable value for additional duty calculation. The petitioners sought relief through a petition under Article 226 of the Constitution of India. The court noted previous decisions supporting the customs authorities' approach, leading to the dismissal of the petitioners' claim.
2. The company later discovered that countervailing duty was not applicable to the imported alcohol. Despite the company's objection, the customs authorities levied the duty, prompting the company to seek a refund. The court acknowledged the company's entitlement to the refund based on a previous judgment that deemed the levy of countervailing duty unlawful. The court rejected the Department's argument that a circular issued by the Central Board of Excise and Customs altered the legal interpretation, emphasizing that the circular could not override established judicial decisions.
3. The court emphasized that the circular's issuance date preceded the relevant judgments, questioning why it was not presented earlier. The court deemed the circular as an attempt to circumvent the judicial decisions and clarified that it could not redefine the legal scope. Ultimately, the court ruled in favor of the petitioners, directing the respondents to verify and refund the countervailing duty amount within four weeks. The court allowed the customs authorities to enforce the bank guarantee furnished by the petitioners for any unrecovered duty. The judgment concluded without any cost orders.
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1991 (7) TMI 80
Issues Involved: Determination of liability to pay duty under Tariff Item No. 27(c) for the process of backing duty paid aluminium foils and entitlement to refund of duty paid under mistake.
Summary:
1. The petitioner, a registered Company, purchased duty paid aluminium foils for packing biscuits and sweets, which were backed with plain or printed paper. The Company paid duty under Tariff Item No. 27(c) from February 1980 to February 1983, but later claimed it was a mistake to pay duty on the aluminium foils backed with paper as duty had already been paid on the foil itself.
2. The Company filed refund claims for various periods, contending that the process of backing the foils does not amount to manufacture and therefore, duty should not be levied. The Company approached the court seeking to restrain the authorities from collecting duty on paper-backed aluminium foils and claiming a refund for the duty paid.
3. The Court analyzed the legal provisions and past judgments cited by both parties. The Company argued that excise duty should not be collected twice on the same excisable goods under the same entry, relying on relevant case laws. The Department contended that duty collection on such goods was permissible, citing a different case law. However, the Court found that the process of backing aluminium foil with paper did not amount to manufacture, as no distinct article emerged from the process.
4. After examining the process undertaken by the Company and the lack of challenge from the Department, the Court concluded that the process of backing aluminium foil was not manufacturing. Therefore, it was erroneous for the Department to recover duty from the Company. The Court ruled in favor of the Company, quashing the show cause notice and directing the refund of duty paid under mistake for the specified period.
5. The Court made the rule absolute, quashed the show cause notice, and ordered the refund of duty paid under mistake. The respondents were directed to verify the refund amount and make the payment within a specified timeline. No costs were awarded, and the bank guarantees and bonds furnished earlier were to be canceled.
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1991 (7) TMI 79
The petitioners sought exemption from excise duty for manufacturing copper cylinders used in textile industries, but the court ruled that the exemption only applies to engraved copper cylinders used in the textile industry. Since the cylinders in question were not engraved, the exemption was not granted. The court discharged the rule with costs.
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1991 (7) TMI 78
Issues Involved:
1. Legitimacy of the refund claim by M/s. B. Sorabjee.
2. Fraudulent activities by Kumar Shah.
3. Complicity of court staff and Advocate Mr. Kantawala.
4. Judicial process abuse and necessary actions against Kumar Shah.
5. Court's procedural recommendations.
Detailed Analysis:
1. Legitimacy of the refund claim by M/s. B. Sorabjee:
The appeal was filed by the Union of India and the Customs authorities against the order directing the refund of Rs. 28,609.05 to M/s. B. Sorabjee. It was discovered that the refund claim was not legitimately made by M/s. B. Sorabjee. Malcolm M. Mowdawala, a partner of M/s. B. Sorabjee, denied filing the writ petition for the refund and stated no refund was received by him. The court concluded that M/s. B. Sorabjee had not claimed the refund through the writ petition, leading to the setting aside of the order under appeal.
2. Fraudulent activities by Kumar Shah:
Kumar Shah admitted to filing the writ petition in the name of M/s. B. Sorabjee and receiving the refund amount of Rs. 28,609.05. He used false information, forged signatures, and manipulated court documents to secure the refund. Shah opened a bank account in the name of M/s. B. Sorabjee to encash the refund cheque and subsequently withdrew the amount. He substituted Exhibit E in the copy of the writ petition submitted to the Customs authorities to claim a higher refund amount of Rs. 14,83,730.22 against 106 bills of entry.
3. Complicity of court staff and Advocate Mr. Kantawala:
Kumar Shah implicated Advocate Mr. Kantawala and court staff in the fraudulent activities. Shah claimed that Mr. Kantawala helped him obtain the original writ petition from the court's record and facilitated the substitution of exhibits. The court noted the involvement of court staff and directed an investigation to identify and proceed against the complicit members.
4. Judicial process abuse and necessary actions against Kumar Shah:
The court recognized the abuse of judicial process by Kumar Shah, who arranged the import and sale of goods using M/s. B. Sorabjee's license. Shah's actions included forging signatures and falsely verifying the writ petition. The court directed the Prothonotary and Senior Master to issue notices to Kumar Shah to show cause why he should not be prosecuted under Sections 191, 209, 210, and 468 read with 471 of the Indian Penal Code and for contempt of court.
5. Court's procedural recommendations:
The court emphasized the need for decrees and orders to explicitly state the amounts decreed or ordered to be paid to prevent manipulation of court records. The court expressed concern over the security of its records and directed an investigation into the involvement of court staff in the fraudulent activities. The court also indicated that further action against Mr. Kantawala would be considered after reviewing the investigation report.
Conclusion:
The appeal resulted in the setting aside of the order directing the refund to M/s. B. Sorabjee due to fraudulent activities by Kumar Shah. The court ordered an investigation into the complicity of court staff and Advocate Mr. Kantawala and directed the issuance of show-cause notices to Kumar Shah for prosecution and contempt. The court also recommended procedural changes to safeguard the integrity of judicial records.
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