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1980 (4) TMI 122
Issues: Proper construction of the third proviso to sub-Section (2) of Section 36 of the Central Excises and Salt Act, 1944 as amended on 1-7-1978.
Analysis:
1. The writ petition raised a question regarding the interpretation of the third proviso to sub-Section (2) of Section 36 of the Central Excises and Salt Act, 1944. The petitioner, a manufacturer of 'portland cement' and 'pozzolana cement,' was called upon to pay duty at a specific rate on pozzolana cement by the Superintendent of Central Excise. Appeals to the Appellate Collector resulted in withdrawal of the demands. Subsequently, the Central Government issued notices under Section 36(2) to review the Appellate Collector's orders, challenging the demands made by the Superintendent. The petitioner contended that the notices were ultra vires of the third proviso to Section 36(2) as they were issued after the limitation period. The main issue was whether the notices fell under the third proviso and were time-barred.
2. Section 36(2) empowers the Central Government to review decisions under Section 35 or 35A for correctness, legality, or propriety. The second proviso allows for the variation of decisions prejudicial to any person within one year. The third proviso, added in 1978, specifically deals with cases where excise duty has not been levied or has been short-levied. The judgment emphasized the distinction between the broad language of the second proviso and the limited scope of the third proviso. The third proviso imposes a shorter limitation period of six months for cases of short-levy or non-levy, reflecting the importance of such cases to both revenue and assesses.
3. The Court highlighted that the impugned notices did not explicitly mention short-levy or non-levy but focused on reviewing the legality, correctness, or propriety of the Appellate Collector's orders. The respondents argued that the notices were under the second proviso and not time-barred. However, the Court disagreed, stating that the language and intent of the notices indicated a revision based on short-levy, falling under the third proviso. The judgment emphasized that the special law of the third proviso prevails over the general law of the second proviso, rendering the notices time-barred and illegal.
4. The Court clarified that the limitation period specified in Section 11A should be read into the third proviso, calculated from the date of the appellate orders. The judgment concluded that since the notices were covered by the third proviso, they could not benefit from the longer limitation period of the second proviso. Consequently, the notices were deemed time-barred and quashed. Other contentions raised by the petitioner against the notices were not considered due to the finding on the limitation issue. Ultimately, the writ petition was allowed, and the impugned show-cause notices were quashed.
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1980 (4) TMI 121
Issues Involved:
1. Validity of Import Licenses
2. Interpretation of Import Trade Policy
3. Role and Responsibility of Licensing Authorities
4. Role and Responsibility of Customs Authorities
5. Jurisdiction under Clause 10C of the Imports (Control) Order, 1955
6. Legal Effect of Public Notices and Executive Instructions
7. Principles of Approbation and Reprobation
8. Determination of Price under Clause 10C
9. Compliance with Bond Conditions
Detailed Analysis:
1. Validity of Import Licenses:
The petitioner, a small-scale industry, was granted import licenses in 1971 to import various items, including niacinamide. The licenses were actual user licenses, meaning the imported goods must be used by the importer and not sold in the market. The petitioner applied for an amendment to include niacinamide in the licenses, which was granted by the Drug Controller and the Joint Chief Controller of Imports and Exports (J.C.C.I.E.). However, the Customs Authorities later alleged that niacinamide was the same as nicotinamide, a banned item, and questioned the validity of the licenses.
2. Interpretation of Import Trade Policy:
The Import Trade Control Hand Book of Rules and Procedure (1971 Edition) and the Import Trade Policy for April 1971 to March 1972 were examined. The policy listed drugs and medicines that could not be imported against general licenses but did not explicitly ban specific items. The court found that the licensing authorities should have known whether niacinamide was a banned item before issuing the license. The court held that the Import Control Policy did not have statutory force and that a license issued by the licensing authority for any item, even if banned, would be valid until canceled or rendered ineffective in accordance with the Imports (Control) Order, 1955.
3. Role and Responsibility of Licensing Authorities:
The court emphasized that it was the duty of the Drug Controller and the licensing authorities to ascertain whether an item was licensable before issuing a license. The petitioner could not be faulted for applying for a license to import niacinamide. The court criticized the licensing authorities for attempting to shift the blame to the petitioner for their own failure to properly interpret the import policy.
4. Role and Responsibility of Customs Authorities:
The Customs Authorities were found to have acted beyond their jurisdiction by interpreting the import policy and refusing to clear the goods despite valid licenses being produced. The court held that the Customs Authorities should only verify whether the goods matched the description in the license and whether the conditions of the license were met. They had no authority to question the validity of the license or interpret the import policy.
5. Jurisdiction under Clause 10C of the Imports (Control) Order, 1955:
The court examined the show cause notice issued under Clause 10C, which alleged that the petitioner had imported a banned item and sought to direct the petitioner to sell the goods to Indian Drugs and Pharmaceuticals Ltd. (IDPL). The court found that Clause 10C only applied to validly imported goods and required a physical inability to use the goods, which was not the case here. The court held that the licensing authority had no jurisdiction to issue directions under Clause 10C based on the alleged ban on niacinamide.
6. Legal Effect of Public Notices and Executive Instructions:
The court held that public notices and executive instructions issued under Article 73 of the Constitution could not override the provisions of the Imports (Control) Order, 1955. The public notice dated 21-9-1972, which sought to prevent the use of imported niacinamide, was found to be ineffective as it attempted to alter the terms of the already granted licenses without following the procedure for cancellation under Clause 9.
7. Principles of Approbation and Reprobation:
The court rejected the respondents' contention that the petitioner was barred from challenging the order under Clause 10C based on the principles of approbation and reprobation. The court found no evidence of a concluded agreement or acquiescence by the petitioner to submit to the jurisdiction of the licensing authority under Clause 10C.
8. Determination of Price under Clause 10C:
The court found that the order fixing the price of niacinamide under Clause 10C was invalid as it did not take into consideration all relevant charges, including demurrage and interest on blocked capital. The court emphasized that the price should be reasonable and not exceed the market price.
9. Compliance with Bond Conditions:
The court noted that the goods were allowed to be cleared beyond the Customs barrier under an interim order, and the bond given by the petitioner would stand canceled and discharged upon the final decision of the petition.
Conclusion:
The court ruled in favor of the petitioner, making the rule absolute in terms of prayers (a) and (a-1), and directed the Customs authorities to comply with the agreement recorded in the minutes dated 2-8-1973. The bond given by the petitioner was canceled and discharged, and the respondents were ordered to pay the costs of the petition. The court stayed the order for eight weeks to allow for any potential appeal.
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1980 (4) TMI 120
Issues Involved:
1. Legality of the confiscation and penalty imposed under Section 111(d) and Section 112 of the Customs Act, 1962.
2. Validity of the declaration and request for re-export under Sections 77 and 80 of the Customs Act, 1962.
3. Interpretation of "import" under the Customs Act, 1962.
Issue-wise Detailed Analysis:
1. Legality of the confiscation and penalty imposed under Section 111(d) and Section 112 of the Customs Act, 1962:
The petitioner, an Indian citizen, arrived at Meenambakkam airport from Saigon on 7-2-1970 and declared his personal effects, including jewellery and diamonds valued at Rs. 80,850. The customs authorities issued a detention receipt based on this declaration. Subsequently, the Additional Collector of Customs issued a show cause notice under Section 111(d) for confiscation and Section 112 for personal penalty. The petitioner was penalized with a Rs. 40,000 fine and the goods were confiscated. The Central Board of Excise and Customs modified the order, allowing re-export on payment of another Rs. 40,000 fine. The petitioner paid the fine and re-exported the items. The Special Secretary to the Government of India reduced the fine to Rs. 5,000 and the penalty to Rs. 15,000, confirming the liability under Sections 111(d) and 112.
2. Validity of the declaration and request for re-export under Sections 77 and 80 of the Customs Act, 1962:
The petitioner claimed that he made a declaration under Section 77 and orally requested re-export under Section 80. The customs authorities detained the items as the petitioner lacked an import license or Reserve Bank permit. The Assistant Collector of Customs argued that the petitioner did not make an oral request for re-export and that his subsequent written request was an afterthought. The court noted that the petitioner made a full declaration upon entering the customs area and did not conceal the items. The court found the declaration to be bona fide and without hesitation, indicating compliance with Sections 77 and 80.
3. Interpretation of "import" under the Customs Act, 1962:
The court examined whether the petitioner had imported the goods under Section 111(d). Section 2(2) defines "import" as bringing into India from outside. The court referenced Supreme Court and Delhi High Court rulings, concluding that goods are not imported merely upon landing but must be incorporated into the country's mass of property. The court held that the petitioner did not import the goods as they had not crossed the customs barrier. The court emphasized that a declaration under Section 77 and a request under Section 80 indicate no intention to import.
Conclusion:
The court found that the petitioner did not contravene Section 111(d) as the goods were not imported into the country. The petitioner's declaration was bona fide, and he had not violated customs laws. The court quashed the confiscation and penalty orders, allowing the writ petition without costs.
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1980 (4) TMI 119
Issues:
1. Whether excise duty on electric motors should be included in the assessable value of mono-block pumping sets.
2. Interpretation of section 4 of the Central Excises and Salt Act regarding the exclusion of excise duty from the assessable value.
3. Maintainability of the petition without approaching the Central Government against the appellate orders.
Analysis:
1. The petitioner manufactured mono-block pumping sets with electric motors, both excisable goods. The dispute arose when the Assistant Collector of Central Excise demanded excise duty for a specific period. The petitioner challenged the orders, arguing whether excise duty on electric motors should be included in the assessable value of pumping sets. The court examined a notification granting exemptions for power-driven pumps fitted with duty-paid electric motors, concluding that excise duty on electric motors cannot inflate the assessable value of pumping sets.
2. The court analyzed section 4 of the Central Excises and Salt Act, emphasizing the definition of 'value' and the exclusion of excise duty from assessable value. The pre-amendment section allowed deductions only for trade discounts and duty payable at the time of removal. The amended section clarified that excise duty should not be part of the value of excisable goods. The court interpreted 'goods' and 'article' to include a part thereof, asserting that excise duty on electric motors attached to pumping sets cannot be part of the assessable value.
3. The respondent raised a preliminary objection on the maintainability of the petition, arguing that the petitioner should have approached the Central Government before filing the petition. The court rejected this objection, stating that the issue involved the interpretation of relevant sections and the exemption notification. The court quashed the impugned orders, directing refunds if any short levy was paid. The judgment highlighted the importance of not inflating assessable values with excise duty on components integral to the main product.
Editor's Comments:
The assessment of excise duty on electric motors in the context of mono-block pumping sets was the crux of this case. The court's interpretation of the law emphasized the integral relationship between electric motors and pumping sets, leading to the exclusion of excise duty on electric motors from the assessable value of the sets. The judgment underscored the significance of understanding the distinct identity and essential nature of components in determining excise duty liabilities.
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1980 (4) TMI 118
Issues: Interpretation of import license for nickel magnesium alloy.
The judgment delivered by Mody, J. of the High Court of Judicature at Bombay pertains to a case involving the interpretation of an import license for nickel magnesium alloy granted to a manufacturer-exporter of automatic looms for textile mills. The petitioner, a registered importer entitled to obtain a license, had been granted two licenses for the periods April 1971 to March 1972 and April 1972 to March 1973. The dispute arose when the Customs authorities objected to the import of nickel magnesium alloy under the second license and subsequently confiscated the goods. The primary issue was whether the description of goods in the license covered nickel magnesium alloy and whether the authorities had correctly interpreted the license.
The petitioner argued that the license description, which referred to components for auto looms as per a previous license, should be construed broadly to include nickel magnesium alloy. The petitioner contended that since the alloy was included in the first license, it should also be deemed permissible under the second license. The Court analyzed the language of the licenses and concluded that the reference to components in the second license must be interpreted in line with the first license, thereby encompassing nickel magnesium alloy. The Court emphasized that any ambiguity in the license description should be resolved in favor of the licensee, following established legal principles.
The judgment referenced legal precedents, including an unreported Supreme Court decision, to support the principle that in case of doubt regarding the interpretation of a license, the benefit should be given to the licensee. The Court distinguished another Supreme Court case cited by the respondent, highlighting that the principle of resolving ambiguity in favor of the importer applied specifically to license interpretation issues. Additionally, the Court dismissed the relevance of other judgments cited by the parties, finding them unrelated to the core principles at hand.
Ultimately, the Court ruled in favor of the petitioner, quashing the confiscation of the goods and the imposed fine. The judgment made the rule absolute in favor of the petitioner, emphasizing that the license should be construed in a manner favorable to the importer, particularly when previous licenses had included the disputed item. No costs were awarded in light of the circumstances of the case.
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1980 (4) TMI 117
Issues:
1. Exemption from excise duty on steam production for captive use.
2. Liability to pay central excise duty on steam production.
3. Interpretation of notification regarding exemption from excise duty.
Analysis:
The petitioner, a cement manufacturing company, generated electric power for captive use in its power house using a boiler. The Central Government issued a notification granting exemption from excise duty on goods produced for captive use. Respondent issued a notice to pay central excise duty and penalty on steam production without a license. The petitioner contested the liability, but the respondent ordered payment of excise duty and penalty. The petitioner did not appeal but challenged the order through a petition.
The petitioner enjoyed exemption from duty on steam and electric power since May 1975. However, for the period between March and April 1975, a different notification exempted goods falling under Item 68, including "Electric, Light and Power." The question arose whether steam was also exempt under this notification.
While electric power was produced exclusively for captive use, steam was not an independent product but an intermediate part of the process. The court held that since steam was produced solely for generating electric power and light, it was not taxable under Item 68 as it was part of the final product. The court emphasized that the taxability under the Central Excises and Salt Act applies to the final product, not the production process.
Consequently, the court quashed the impugned order, ruling in favor of the petitioner. The petition succeeded, and the rule was made absolute with costs.
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1980 (4) TMI 116
Issues:
1. Validity of demand notices issued by the Inspector of Central Excise.
2. Applicability of excise duty rate at the time of manufacture versus at the time of removal.
3. Interpretation of the taxable event for excise duty.
Analysis:
Issue 1: Validity of demand notices
The petitioners, manufacturers of P.V.C. Leather Clothes, challenged demand notices issued by the Inspector of Central Excise before the High Court. The notices demanded payment of duty based on an old tariff item, contrary to the new tariff item introduced. The petitioners objected to the demand, citing that the goods fell under the new item. The Court found the demand notices premature and without jurisdiction as they were issued before the goods were removed from the factory, emphasizing that duty can only be demanded at the time of removal.
Issue 2: Applicability of excise duty rate
The petitioners argued that excise duty should be charged at the rate applicable at the time of removal, not manufacture. The Court referred to a previous judgment establishing that duty is levied at the time of removal, not manufacture. It clarified that the taxable event triggering duty payment is the removal of goods from the factory, not their production. Consequently, the demand notices based on the old rate were deemed invalid.
Issue 3: Interpretation of taxable event
The respondents contended that duty under the new tariff item was payable at the time of removal, not manufacture. They argued that the assessment order, initially assessing duty as nil, was provisional due to uncertainties regarding the applicable rate. However, the Court rejected this argument, deeming the assessment valid. It emphasized that duty determination as nil was not done without judicial application of mind, as claimed by the respondents. Ultimately, the Court set aside the demand notices, directing the respondents not to enforce them.
In conclusion, the High Court held the demand notices invalid, emphasizing the importance of levying excise duty at the time of removal and not manufacture. The Court also rejected the argument that the assessment order was provisional, ruling in favor of the petitioners and directing the respondents not to enforce the demand notices.
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1980 (4) TMI 115
Issues:
Violation of Rule 10 in issuance of demand notice without a prior show cause notice.
Analysis:
The petitioners, manufacturers of nuts and bolts, were granted an exemption from duty under a Notification if the value of goods did not exceed Rs. 5,00,000. However, they cleared goods exceeding this value without paying the requisite duty. A notice of demand was issued under Rule 10 of the Central Excise Rules, demanding payment of Rs. 49,852.92. The petitioners contended that the demand notice was issued without a prior show cause notice, violating Rule 10(1). The Assistant Collector, after a personal hearing, upheld the demand notice, leading to an appeal by the petitioners against this decision.
A judgment delivered by Rege J. in a different case concluded that a demand notice without a show cause notice was invalid as per Rule 10. The petitioners cited this judgment before the Appellate Collector, arguing that the demand was illegal and void. However, the Appellate Collector summarily rejected this contention, failing to provide reasons for disregarding the precedent judgment. The petitioners' argument was based on the fact that the demand notice was issued straightaway without a show cause notice, rendering it invalid under Rule 10.
The Appellate Collector's decision was deemed dishonest as he failed to address the petitioners' valid argument regarding the legality of the demand notice. The petitioners' counsel was unable to demonstrate how the judgment did not apply to the present case, raising similar contentions that were previously rejected. Additionally, the argument that the demand could be covered under Rule 10A instead of Rule 10 was deemed irrelevant, as both rules require a show cause notice before making a demand. The court held that the absence of a show cause notice rendered the demand illegal and void, regardless of the specific rule under which it was made.
Consequently, the Rule was made absolute in favor of the petitioners, and the respondents were directed to pay the costs of the petition. The judgment highlighted the importance of adhering to procedural requirements, specifically the issuance of a show cause notice before demanding payment under the Central Excise Rules.
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1980 (4) TMI 114
The Central Government of India allowed a revision application stating that Rule 11 of the Central Excise Rule 1944 does not apply to cases of advance deposit, which should be governed by the General Limitation Act instead. (Citation: 1980 (4) TMI 114 - GOVERNMENT OF INDIA)
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1980 (4) TMI 113
Issues:
1. Discrepancy in stock balance leading to allegations of furnishing erroneous information for financial accommodation.
2. Application of Rule 9(2) and the necessity to prove clandestine removal of goods.
3. Interpretation of judicial pronouncements on the issue of discrepancy in stock declarations.
4. Argument regarding limitation under Section 40(2) of the Central Excises and Salt Act.
Analysis:
1. The judgment addresses a case where the petitioners were accused of providing incorrect information to a bank for financial accommodation due to a discrepancy in stock balance. The petitioners rectified the mistake by adjusting the excess stock balance, which was approved by excise authorities after a joint stock taking. The government noted that there was no evidence of goods being cleared without payment of duty, emphasizing the importance of proving clandestine removal to apply Rule 9(2).
2. The judgment refers to a similar case decided by the Madras High Court, highlighting the importance of accurate stock declarations. The petitioners argued that statutory excise records should be trusted over bank statements, especially when the latter were inflated. The court emphasized the need for strong evidence to prove manipulation of excise records, suggesting that the accuracy of official figures should be presumed unless proven otherwise.
3. Regarding the argument on limitation under Section 40(2) of the Central Excises and Salt Act, the judgment discusses conflicting views from different High Courts. While some courts considered assessment proceedings exempt from the limitation period, others viewed it as applicable only to court proceedings, not departmental actions for duty quantification. The government concluded that the plea of limitation is not valid when goods are found to have been removed without duty payment and escaped assessment.
4. Ultimately, the revision application was allowed based on the merits of the case, specifically highlighting the lack of evidence for clandestine removal of goods and the importance of relying on accurate excise records. The judgment provides a detailed analysis of the issues surrounding the discrepancy in stock declarations, the application of relevant rules, and the interpretation of legal provisions related to limitation in excise duty cases.
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1980 (4) TMI 112
Issues:
- Claim for drawback of duty on damaged goods exported by the petitioners.
- Interpretation of the term "export" under the Customs Act, 1962.
- Determination of whether the goods were exported out of India as per legal definitions.
- Validity of the orders passed by the Customs authorities rejecting the claim for drawback.
Analysis:
The case involved a dispute regarding the claim for drawback of duty on goods exported by the petitioners, which were damaged during transportation on the ship M.V. Ratna Usha. The petitioners contended that the goods should be considered as exported since they were sold to a foreign buyer, and the property had passed to the buyer. However, the Customs authorities rejected the claim on the grounds that the goods had not crossed the customs frontier, and therefore, had not been exported out of the country.
The key legal issue revolved around the interpretation of the term "export" as defined in the Customs Act, 1962. Section 2(18) of the Act defines export as 'taking out of India to a place outside India.' The Court analyzed the definitions of 'export' and 'export goods' under the Act to determine whether the goods in question met the criteria for being considered as exported.
The Court emphasized that for an export to be recognized under the law, the goods must have been taken out of the territorial waters of India, beyond the 12 nautical miles limit. Despite the property passing to the foreign buyer and the goods being loaded on the ship, the Court held that the goods had not left the Port of Madras and therefore had not been exported as per the legal requirements.
Furthermore, the Court clarified that factors such as the passing of property, sale to a foreign buyer, or subsequent actions taken with the damaged goods were irrelevant in determining whether the goods had been exported out of India. The Court upheld the decisions of the Customs authorities, concluding that the goods had not met the legal definition of export, and thus, the claim for drawback of duty was rightly rejected.
In light of the above analysis, the Court dismissed the writ petition filed by the petitioners, upholding the orders passed by the Customs authorities. The Court ruled that there would be no order as to costs in this matter.
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1980 (4) TMI 111
Issues:
1. Inclusion of the value of wooden containers and strappings in the assessable value of glass products.
2. Entitlement to claim deduction of trade discount from the assessable value of glass products.
3. Levying excise duty on the enhanced value of glass products due to grinding process and hole-boring.
Analysis:
1. The petitioners, engaged in manufacturing glass products and wooden containers, questioned the inclusion of wooden containers' value in the assessable value of glass products. The court, citing precedents, held that wooden containers do not form part of the manufacturing process of glass products. The value of wooden containers cannot be included in the assessable value of glass products for excise duty purposes, regardless of whether the containers are purchased or manufactured by the petitioner. This issue was decided in favor of the petitioners based on legal interpretations and previous judgments.
2. Regarding the trade discount, the court examined the practice of allowing trade discounts by the petitioners. It was established that trade discounts passed on to wholesale purchasers could be deducted from the assessable value of glass products. However, if the trade discount was not extended to wholesale buyers but only to branches or depots, it would not be eligible for deduction. The court referred to statutory provisions and emphasized that trade discounts must genuinely reflect the actual value of products to be eligible for deduction.
3. The court addressed the application of grinding and hole-making processes to glass products. It was argued that these processes were not part of the manufacturing activity as defined by the Central Excises and Salt Act. However, the court disagreed, stating that these processes rendered the glass products marketable and complete for excise purposes. Therefore, charges for grinding and hole-making processes could be included in the assessable value of glass products. The court emphasized the marketability and completion of products post these processes for taxation purposes.
In conclusion, the court ruled in favor of the petitioners regarding the inclusion of wooden containers' value and trade discount deduction. However, it upheld the inclusion of charges for grinding and hole-making processes in the assessable value of glass products. The impugned orders were quashed, and the central excise authorities were directed to reassess the value of the excisable goods based on the principles outlined in the judgment.
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1980 (4) TMI 110
Issues Involved:
1. Maintainability of the petitions.
2. Requirement of a license under the Central Excises and Salt Act, 1944.
3. Applicability of Items 22D and 68 of the First Schedule to the Central Excises and Salt Act, 1944.
4. Definition and classification of "Banians" and "Jangias" as "articles of hosiery."
5. Violation of Article 14 of the Constitution (proposed amendment).
Detailed Analysis:
1. Maintainability of the Petitions:
The primary issue raised by Mr. Vakil was the maintainability of the petitions, arguing that the petitioners were merely directed to take out a license under the Central Excises and Salt Act, 1944, and an appeal against such a notice lies to the Collector, Central Excise, under Section 35 of the Act. The court rejected this preliminary objection, stating that failure or omission to comply with such a notice results in penal consequences, making the petitions maintainable under Article 226 of the Constitution.
2. Requirement of a License under the Central Excises and Salt Act, 1944:
The court examined whether the petitioners were required to take out a license for manufacturing "Banians" and "Jangias." It was argued by Mr. Vakil that irrespective of whether Item 22D or Item 68 of the First Schedule is attracted, a license is necessary. The court found this proposition fallacious, stating that if the articles manufactured do not fall under any of the specified items in the Schedule, it is not necessary to take out a license.
3. Applicability of Items 22D and 68 of the First Schedule:
The court analyzed Items 22D and 68 to determine their applicability. Item 22D covers "articles of ready-to-wear apparel, including undergarments and body-supporting garments but excluding articles of hosiery." Item 68 is a residuary item for "all other goods not elsewhere specified." The court concluded that "articles of hosiery," which include "Banians" and "Jangias," are statutorily excluded from Item 22D and cannot be included in Item 68 by implication. The expression "not elsewhere specified" in Item 68 means total omission or failure to specify either for taxability or exemption. Thus, "articles of hosiery" are exempt from taxability under Item 22D and cannot be taxed under Item 68.
4. Definition and Classification of "Banians" and "Jangias" as "Articles of Hosiery":
The court referred to various definitions and judicial interpretations to classify "Banians" and "Jangias" as "articles of hosiery." The Oxford English Dictionary defines "hosiery" as frame-knitted articles of apparel. Judicial precedents from the High Courts of Rajasthan and Allahabad support the inclusion of "Banians" and "Jangias" in the category of hosiery goods. Consequently, the court held that "Banians" and "Jangias" are indeed "articles of hosiery" and are exempt from excise duty under Item 22D.
5. Violation of Article 14 of the Constitution (Proposed Amendment):
The petitioners sought to amend their petitions to include a contention of violation of Article 14 of the Constitution. However, in light of the court's decision that "articles of hosiery" are exempt from the provisions of the Central Excises and Salt Act, 1944, the proposed amendments were deemed unnecessary and were rejected.
Conclusion:
The court declared that "articles of hosiery," including "Banians" and "Jangias," manufactured with the aid of power, are exempt from the provisions of the Central Excises and Salt Act, 1944. Consequently, the impugned notices issued to the petitioners were quashed, and the rule was made absolute in each case with costs. All applications for amendment were rejected.
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1980 (4) TMI 109
Issues involved: Interpretation of Notification No. 82/74 for exemption from Central Excise duty based on manufacturing arrangement with Parles Bottling Company.
Summary:
1. The party, a manufacturer of aerated waters, was enjoying exemption u/s Notification No. 82/74 due to power usage conditions. As per Franchise Agreement with Parles, they manufactured aerated waters under the brand name 'Parles'. Asstt. Collector held them to be manufacturing for Parles, exceeding power limit, thus not eligible for exemption.
2. On appeal, the Appellate Collector ruled in favor of the party, stating they were not manufacturing for Parles, hence eligible for the concession under Notification No. 82/74.
3. Government of India, u/r section 36(2) of Central Excises and Salt Act, initiated suo motu revision to review the Appellate Collector's order, issuing a show cause notice to the party based on proposed grounds for review.
4. Party contended they were independent manufacturers, not related to Parles, complying with all legal requirements. Citing precedents and legal provisions, they argued against the review, emphasizing their status as the actual manufacturer of the goods.
5. After considering submissions, Government observed party's independence from Parles, being licensed manufacturers assessed for taxes independently. They concluded that the party, not Parles, was the manufacturer as per legal definitions and precedents, upholding the order-in-appeal and dropping the review proceedings.
6. Government's decision was based on the distinction between manufacturer and brand owner, emphasizing the party's autonomy in production and sale of goods, irrespective of the brand name association.
7. Consequently, Government upheld the order-in-appeal, affirming the party's eligibility for the exemption under Notification No. 82/74, and concluded the review proceedings in favor of the party.
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1980 (4) TMI 108
Issues Involved:
1. Validity of the amended Item No. 43 under Section 3 of the Central Excises and Salt Act.
2. Competence of Parliament under Entry 84 of List I of the 7th Schedule to the Constitution to amend Item No. 43.
3. Requirement of removal of goods for excise duty under Rules 9 and 49 of the Central Excise Rules, 1944.
Detailed Analysis:
1. Validity of the amended Item No. 43 under Section 3 of the Central Excises and Salt Act:
The petitioners argued that the amended Item No. 43, which includes 'carded gilled sliver,' is ultra vires Section 3 of the Act. They contended that excise duty can only be levied on "manufactured goods which are known to the market." Since the sliver is not a marketable commodity, it should not be subject to excise duty. However, the court did not find it necessary to delve into this issue as the petition was decided on the third contention.
2. Competence of Parliament under Entry 84 of List I of the 7th Schedule to the Constitution to amend Item No. 43:
The petitioners further argued that Parliament was not competent to amend Item No. 43 to include an item that is not 'goods' and not 'manufactured.' They relied on Supreme Court decisions that excise duty can only be levied on marketable commodities produced through a manufacturing process. Again, the court did not address this issue in detail, as the decision was based on the third contention.
3. Requirement of removal of goods for excise duty under Rules 9 and 49 of the Central Excise Rules, 1944:
The court focused on the third contention, which argued that excise duty could only be charged and collected if there was removal of the product from the place of manufacture, as per Rules 9 and 49. The court examined the relevant provisions:
- Section 3(1) of the Act: It mandates that excise duty is levied and collected in a prescribed manner.
- Section 4 of the Act: It prescribes the mode of computing the value of excisable goods, emphasizing that the value is determined at the time and place of removal.
- Rules 9 and 49 of the Central Excise Rules: These rules stipulate that no excisable goods shall be removed from the place of manufacture without payment of excise duty. Rule 49 specifically states that duty is required only when goods are removed from the place of manufacture or an approved place of storage.
The court noted that in this case, the sliver is consumed within the factory premises and is not removed. Therefore, no excise duty can be levied. The court relied on the precedent set in the case of The Delhi Cloth & General Mills Co. Ltd., where it was held that excise duty could not be levied if the goods were not removed from the factory.
Judgment:
The writ petition was allowed, and the respondents were restrained from levying excise duty on the sliver obtained by the petitioners as an in-process material used in the manufacture of semi-woollen worsted yarn. The court concluded that the proposed levy and collection were not in accordance with the provisions of Rules 9 and 49 of the Central Excise Rules. Each party was ordered to bear its own costs.
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1980 (4) TMI 107
Issues Involved:
1. Inclusion of post-manufacturing expenses in the assessable value for excise duty.
2. Constitutionality of Section 4 of the Central Excises and Salt Act, 1944.
Detailed Analysis:
Issue 1: Inclusion of Post-Manufacturing Expenses in the Assessable Value for Excise Duty
The petitioner, a cigarette manufacturing company, challenged the inclusion of post-manufacturing expenses in the assessable value for excise duty. These expenses included advertisement expenses, storage expenses, marketing and distribution expenses, and bank charges and interest recovered from wholesale buyers. The Assistant Collector of Central Excise included these expenses in the assessable value, and the Appellate Collector of Central Excise confirmed this decision.
The court examined whether "the normal price" of excisable goods, as defined in the amended Section 4 of the Central Excises and Salt Act, 1944, includes post-manufacturing expenses. The court referred to several decisions, including Cibatul Limited v. Union of India, which established that excise duty should be levied only on manufacturing costs and manufacturing profits, excluding post-manufacturing costs and post-manufacturing profits.
The court concluded that:
- Storage Expenses: These are post-manufacturing expenses as they occur after the goods are fully manufactured. Therefore, they cannot be included in the assessable value.
- Marketing and Distribution Expenses: These expenses arise after the goods are ready for market and are unrelated to manufacturing. Hence, they cannot form part of the manufacturing costs.
- Bank Charges and Interest: These expenses are related to the sale of goods and not to their manufacture. Therefore, they are post-manufacturing expenses and cannot be included in the assessable value.
- Advertisement Expenses: These can be partially included in the manufacturing costs if they are incurred before the goods are manufactured to secure future markets. However, advertisement expenses incurred after the goods are manufactured are related to selling activities and should be excluded from the assessable value. The central excise authorities must apportion these expenses between manufacturing and selling activities.
Issue 2: Constitutionality of Section 4 of the Central Excises and Salt Act, 1944
The petitioner argued that if post-manufacturing expenses are included in the assessable value, Section 4 of the Central Excises and Salt Act, 1944, would be ultra vires the legislative competence of Parliament under Article 246 of the Constitution read with Entry 84 in List I and Entry 54 in List II.
The court referred to its decision in Cibatul's case, where it was held that excise duty can only be levied on the manufacturing costs and profits, and including post-manufacturing costs would render Section 4 ultra vires. The court reiterated that the assessable value should only include manufacturing costs and profits to remain within the legislative competence of Parliament.
Conclusion:
The court declared that the expenses incurred by the petitioner on storage, marketing and distribution, and bank charges cannot form part of the "normal price" under Section 4(1)(a) of the Central Excises and Salt Act, 1944, and hence cannot be included in the assessable value for excise duty. However, advertisement expenses can be partially included in the manufacturing costs based on their relation to manufacturing activities. The central excise authorities are directed to apportion the advertisement expenses accordingly.
The court also noted that the value of corrugated fibre containers (CFC) or wooden cases used for packing should not form part of the assessable value, as conceded by the central excise authorities. The petitioner's claim for a refund related to these packing materials should be finalized within three months.
The impugned orders were quashed, and the central excise authorities were directed to re-determine the assessable value in light of this decision. If it is found that the petitioner has paid more than required, the excess amount should be refunded.
The court rejected the respondents' application for a certificate of fitness to appeal to the Supreme Court under Article 133(1) of the Constitution, as the case did not involve the interpretation of any Constitutional provision or raise any substantial question of law.
The court maintained the interim arrangement for two months, allowing the petitioner to furnish a bank guarantee for the difference in excise duty.
Separate Judgments:
No separate judgments were delivered by the judges in this case.
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1980 (4) TMI 106
Issues Involved:
1. Whether placing imported record changer decks on a wooden base with a cover constitutes "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944.
2. The applicability of excise duty on the Bush Auto Changers.
3. The validity of the orders passed by the Assistant Collector, Appellate Collector, and Joint Secretary rejecting the petitioner's claims.
4. The entitlement of the petitioner to a refund of excise duty paid.
Detailed Analysis:
Issue 1: Definition of "Manufacture" under Section 2(f) of the Act
The primary question was whether the act of placing imported Garrard record changer decks on a wooden base with a cover amounted to the manufacture of a new and different article within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944. The Court observed that the imported record changer decks were mechanically, electrically, and functionally complete and could be used in their imported condition without needing a wooden base or cover. It was emphasized that the word "manufacture" implies the creation of a new substance known to the market, and not merely a change in the substance. Citing the Supreme Court's rulings in Union of India v. Delhi Cloth and General Mills Co. Ltd. and S.B. Sugar Mills v. Union of India, the Court concluded that no new article with a distinctive name, character, or use emerged from merely placing the decks on a wooden base. Therefore, this process did not constitute "manufacture."
Issue 2: Applicability of Excise Duty
The Court examined whether excise duty was applicable to the Bush Auto Changers. The petitioner argued that since the imported decks were already complete articles, no new product was manufactured by placing them on a wooden base. The respondents, however, claimed that the decks were not functionally complete and required the base to be sold to customers. The Court rejected this argument, noting that the decks were capable of functioning without the base and that the process did not result in a new product. Consequently, the Court held that excise duty was not applicable to the Bush Auto Changers.
Issue 3: Validity of the Orders
The petitioner challenged the orders dated 7th July 1971, 26th February 1973, and 10th October 1975, passed by the Assistant Collector, Appellate Collector, and Joint Secretary, respectively. The Court found that these orders failed to consider the Supreme Court's decisions in the Delhi Cloth Mills and S.B. Sugar Mills cases, which were directly relevant to the issue at hand. The reasoning provided in these orders was deemed unintelligible and not in accordance with the established legal principles. Therefore, the Court set aside these impugned orders.
Issue 4: Entitlement to Refund
The petitioner sought a refund of Rs. 3,40,222.24, representing the difference between the excise duty paid and the countervailing duty credited. The Court noted that since the process did not constitute manufacture, the excise duty collected from the petitioner was erroneous. The respondents were thus liable to refund the amount paid by the petitioner between July 1971 and October 1975. The Court ordered the respondents to refund the amount within three months and also awarded costs to the petitioner.
Conclusion
The Court ruled that placing imported record changer decks on a wooden base with a cover did not constitute "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944. Consequently, no excise duty was payable on the Bush Auto Changers. The orders passed by the Assistant Collector, Appellate Collector, and Joint Secretary were set aside, and the respondents were directed to refund Rs. 3,40,222.24 to the petitioner within three months, along with costs.
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1980 (4) TMI 105
Issues Involved:
1. Classification of nylon twine under the Central Excises and Salt Act, 1944.
2. Applicability of Item 18 versus Item 68 for excise duty purposes.
3. Interpretation of "yarn" and "twine" in commercial and legal contexts.
4. Burden of proof on the taxing authorities.
5. Applicability of principles from previous case law.
Detailed Analysis:
1. Classification of Nylon Twine under the Central Excises and Salt Act, 1944:
The primary issue revolves around whether nylon twine can be classified under Item 18 of the First Schedule to the Central Excises and Salt Act, 1944, which pertains to "Rayon and Synthetic Fibres and Yarn," or if it should fall under the residuary Item 68, which covers "all other goods, not elsewhere specified."
2. Applicability of Item 18 Versus Item 68 for Excise Duty Purposes:
The petitioners argued that nylon twine is essentially nylon yarn, specifically a man-made filament yarn that is non-cellulosic and other than textured. The process of manufacturing nylon twine involves giving a ply twist or cable twist to strands of 210 denier nylon yarn, primarily for making fishing nets. The Excise authorities contended that nylon twine is distinct from nylon yarn and should be taxed under Item 68.
3. Interpretation of "Yarn" and "Twine" in Commercial and Legal Contexts:
The court examined various definitions and standards, including those from the Encyclopaedia Britannica, the Indian Standards Institution, and the Food and Agriculture Organisation of the United Nations. These sources generally defined "yarn" as a continuous strand of fibres grouped or twisted together, suitable for textile construction, and "twine" as a ply yarn made by twisting two or more strands of yarn.
The court also considered trade practices and expert affidavits, which indicated that nylon twine is regarded as a type of nylon yarn in the industry. The court emphasized that the test to determine whether twine is different from yarn is how it is understood in common parlance and by people in the trade.
4. Burden of Proof on the Taxing Authorities:
The court highlighted that the burden of proof lies on the respondents (taxing authorities) to establish that nylon twine is not covered by Item 18 and should be taxed under Item 68. The court found that the respondents failed to meet this burden, as there was sufficient material to show that nylon twine is commercially considered a type of nylon yarn.
5. Applicability of Principles from Previous Case Law:
The court referred to several precedents, including Dunlop India Ltd. v. Union of India and Commissioner of Sales Tax, U.P. v. Sarin Textile Mills, which emphasized that the meaning of articles in fiscal statutes should align with how they are understood in trade and commerce. The court also cited the principle that when two possible views exist regarding tax liability, the one favoring the subject should be adopted.
Conclusion:
The court concluded that nylon twine retains its character as nylon yarn despite the special process applied to it. Therefore, it should be classified under Item 18, not the residuary Item 68. The petitioners were entitled to a refund of the excess excise duty collected under Item 68.
Separate Judgment by Masodkar, J.:
Masodkar, J. concurred with the majority judgment but expressed a preference for a different interpretation. He opined that "yarn" signifies the basic filament distinct from "twine," which is a processed product. However, he acknowledged that when two views are possible, the one favoring the subject should prevail. He emphasized the importance of specificity in fiscal statutes and agreed that nylon twine could be classified under Item 18 based on commercial understanding.
Per Court:
The rule was made absolute, and the respondents were directed to refund the excess excise duty collected from the petitioners. No order as to costs was made.
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1980 (4) TMI 104
Issues Involved:
1. Whether kyanite qualifies as a "mineral ore" under Item No. 19 of the Tax Credit Certificate (Exports) Scheme, 1965.
2. Interpretation of the term "ore" in the context of tax credit eligibility.
Detailed Analysis:
Issue 1: Whether kyanite qualifies as a "mineral ore" under Item No. 19 of the Tax Credit Certificate (Exports) Scheme, 1965.
The appellants, companies involved in the manufacturing and exporting of refractories including calcined kyanite, challenged the rejection of their applications for tax credit certificates by the Assistant Director of Tax Credit (Exports). The rejection was based on the determination that kyanite did not qualify as a "mineral ore" under Item No. 19 of the Scheme. The Director of Tax Credit (Exports) upheld this decision, stating that "ore" is defined as an aggregate of minerals from which a metal can be profitably extracted, and kyanite did not meet this criterion.
Issue 2: Interpretation of the term "ore" in the context of tax credit eligibility.
The core question was whether kyanite could be considered a "mineral ore". The appellants argued that modern usage of the term "ore" should include any mineral that can be mined or worked out at a profit, not necessarily requiring metallurgical extraction. They supported their argument with various definitions and authorities, including a broader definition from R. D. Parks and observations from "Introduction to India's Economic Minerals" by N. L. Sharma and K.S.V. Ram.
The revenue countered that kyanite, despite containing alumina, could not be classified as an ore because the metal could not be commercially extracted at a profit. They cited numerous authoritative sources defining "ore" as a mineral from which metal can be profitably extracted.
Judgment:
The court reviewed various authoritative definitions of "ore" and concluded that the widely accepted definition is that an ore must be a mineral from which metal can be extracted profitably. The court noted that while some authorities suggested that a mineral mined at a profit could be considered an ore, this view was not widely supported and was against the weight of the authorities.
The court emphasized the importance of the popular meaning of terms in taxing statutes, as endorsed by the Supreme Court in CST v. Jaswant Singh, which advised adopting the commercial sense of terms. The court found that the revenue's interpretation was neither perverse nor unreasonable and adhered to the popular definition of "ore".
The court also referenced the Supreme Court's stance in Collector of Customs v. Ganga Setty, which held that if an interpretation favoring the revenue is reasonably adopted, the court should not interfere merely because another interpretation might seem preferable.
Conclusion:
The court dismissed the appeals, agreeing with the revenue's interpretation that kyanite does not qualify as a "mineral ore" under the Scheme. The learned judge's decision to discharge the rules nisi was upheld, and the appellants' interpretation was not accepted for the purpose of obtaining tax benefits under the Scheme. The court concluded that the popular and commercially accepted definition of "ore" should be applied, which requires the profitable extraction of metal from the mineral.
Both appeals were dismissed without any order for costs.
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1980 (4) TMI 103
Issues:
- Claim for deduction of aggregate amounts under section 80J for multiple assessment years
- Requirement of furnishing relevant particulars for claiming relief under section 80J
- Interpretation of section 80J in relation to newly established industrial undertakings
- Consideration of statutory obligations for claiming relief under section 80J
- Allowance of carry forward of section 80J relief in subsequent assessment years
Analysis:
The judgment pertains to a private limited company engaged in the manufacture and sale of insulators for electrical industries. The company claimed relief under section 80J for the assessment year 1972-73, amounting to Rs. 1,38,190, which included amounts from previous assessment years. The Income Tax Officer (ITO) allowed a deduction of only Rs. 51,389 for the current assessment year, disallowing the claim for the previous years due to lack of furnished particulars. The company contended that it was not a statutory requirement to quantify the relief under section 80J in the relevant assessment years and that the relief could be claimed when profits were made. The Appellate Assistant Commissioner (AAC) rejected this argument, leading to an appeal before the Tribunal.
The Tribunal held that section 80J was intended to encourage new industrial enterprises and should be liberally construed. It found no requirement in the law for the assessee to have quantified the deduction in the relevant assessment years. The Tribunal accepted the company's claim and directed the ITO to verify the details provided by the assessee. Subsequently, the Tribunal referred a question to the High Court regarding the allowance of the aggregate deduction for the previous years in the current assessment year, despite the failure to furnish relevant particulars in the respective assessment years.
The revenue contended that relief under section 80J can only be allowed if the conditions specified under section 80J(4) are fulfilled, which necessitates the furnishing of necessary particulars in the initial year of the industrial undertaking's establishment. However, the High Court referred to a previous judgment and highlighted that section 80J is meant to provide incentives to industries and allows for the carry forward of deductions even in cases where the claim was not made in preceding assessment years due to losses incurred.
Ultimately, the High Court upheld the Tribunal's decision, stating that the company's claim for deduction under section 80J for the previous assessment years should be allowed for the current assessment year, despite the lack of claims in the earlier years where no profits were generated. The High Court answered the referred question in favor of the assessee, emphasizing the admissibility of the claim subject to verification of details. The assessee was awarded costs, including counsel fees.
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