TMI Blog1970 (8) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of that phrase in the Central Excise Rules, 1944, made under the Central Excise and Salt Act, 1944 hereinafter referred to as the Act. 3. Under Item 19 in the First Schedule to the Act, excise duty is levied on cotton fabrics. The rate of duty fixed in respect of these goods in the First Schedule has never been enforced, except in respect of sub-item (5) which is cotton fabrics, not otherwise specified . At the material time, the rate of duty for that sub-item was 83 paise per sq. metre. The rate of duty as regards the other four sub-items of Item 19 was by the Notifications issued under sub-rule (1) of rule 8 of the Central Excise Rules continuously charged at much lower rates specified in the Notifications issued from time to time. By the Notification dated July 4, 1958 for the first time these sub-items (1) to (4), (viz. Cotton fabrics, (i) Superfine, (ii) Fine. (iii) Medium, and (iv) Coarse were expanded so as to levy excise duty so that even independent processors became liable to pay duly of excise for processing grey cotton fabrics produced by other manufacturers. Now, this Notification and the subsequent Notifications dealing with the same subject took notice of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removed from the licensed and specified godown maintained by the Petitioner Company. In January, 1968 the Excise Authorities decided that the excise duty - in respect of lappet full voiles and Butta voiles was not chargeable on the footing that these were cotton fabrics superfine falling in sub-item (1) of Item 19, i.e., these goods were Cotton fabrics, not otherwise specified and were liable to pay excise duty at the rate of 80 paise per sq. metre. The three impugned reassessments and the notices of demand were made on the above footing. By the notices of demand dated April 12, 1968 copy whereof is Ex. I to the Petition, in respect of the period May 26, 1966 to October 25, 1967 under rule 10A of the Excise Rules, the Petitioner Company was called upon to pay ₹ 3,48,571.94. By the two notices of demand, both dated February 16, 1968, copies whereof are respectively Exs. D and C, as subsequently modified by a further notice dated March 23, 1968. Copy whereof is Ex. H to the Petition in respect of the two respective periods of October 26, 1967 to November 15, 1967 and November 16, 1967 to February 16, 1968, the Petitioner Company was called upon respectively to pay ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from those manufacturers. The attempt to recover the same excise duty from the Petitioner Company was an attempt to collect twice over the duty that was recoverable from those manufacturers. Law does not permit collection of duty twice over in respect of any of the excisable goods mentioned in the First Schedule to the Act. As the duty claimed was never levied and or payable by the Petitioner Company, the reassessments and the demands are without jurisdiction and illegal. 6. The further subsidiary contentions, which we will not be required to dispose of in detail, were that having regard to the circumstances mentioned above, the Central Excise Department had knowledge that the Petitioner Company wat not liable to pay any further duty and the demand made was accordingly fraudulent exercise of power. The Department had found it impossible to make the claim for the alleged short levy of duty against the original manufacturers and therefore, the Department had been arbitrarily and capriciously attempting to recover duty payable by those manufacturers from the Petitioner Company. In connection with the reassessments made, the Department had failed to serve any notice and had faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission was that the arguments advanced by Mr. Joshi on behalf of the Petitioner Company were on the wrong footing that goods falling under this sub-item (5) were not liable to pay excise duty at the above three different stages of processing of grey fabrics. The effect of the submission................was that the lappet full voile and Butta voile recovered by the Petitioner Company for processing were merely grey goods. By processing them, that is, by bleaching, dying and/or printing. The Petitioner Company had produced now excisable goods. This article was once again liable to pay duty as falling under sub-item (5) of Item 19, that is, as Cotton fabrics, not otherwise specified . For the above reason, in his submission, there was no substance in the contention of Mr. Joshi that in respect of the same article, duty was sought to be recovered by the above demands twice over from two manufacturers. He developed this argument by stating that the price of the grey lappet voile and Butta-voile sold in the market would always be altogether different from the bleached, dyed and/or printed lappet voile and Butta voile ultimately manufactured by the Petitioner Company. The goods proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese very goods when subsequently processed were new and different kind of excisable goods. The Petitioner Company never applied for relief under section 56A and was, therefore, liable to pay duty at the rate of 80 paise per sq. metre in respect of the goods processed by it on the footing that these were new goods falling in sub-item (5) of Item 19. In that connection he argued that the goods in question were even more sophisticated than the Cotton fabrics, Superfine mentioned in sub-item (1). It was impossible that for such highly sophisticated goods duty was not payable under sub-item (5). He pointed out that under the scheme of the Act there were several items where duty was charged on the same goods more than once. He relied upon item 4 in the First Schedule to the Act relating to tobacco, which has sub-items of unmanufactured tobacco and manufactured tobacco thereunder there are further sub-items reading cigars and cheroots as well as cigarettes and Biris . The submission was that there was nothing novel in recovering excise duty in respect of goods for which excise duty might already have been paid. Tobacco charged to duty as such was once again charged to duty whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Schedule runs as follows : 19 COTTON FABRICS * * * * (1) Cotton Fabrics, Superfine- * * * * (2) Cotton Fabrics, Fine- * * * * (3) Cotton Fabrics, Medium- * * * * (4) Cotton Fabrics, Coarse- * * * * (5) Cotton Fanbrics, Coarse * * * * The completed manufactured product which is excisable goods under this Item must he cotton fabrics of the description contained in the above sub-item (1) to ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to make any claims on.the goods. That would be so in connection with goods falling in sub-items (1) to (5) of cotton fabrics manufactured by any mill and released to trade. If the duty was short-levied, it could only be collected from the manufacturer who got the goods released. No dealer in the market who dealt with such goods, would be concerned with the failure of the excise authorities in not collecting wholly and completely the duty payable in respect of such goods, nor will such dealer in the market be concerned with mistakes which might have been committed as regards the true item of excise which was applicable to such released goods. The questions raised in this petition will have to be decided in this case on the footing of the above general propositions. 12. It is necessary in the first instance to mention that the rate of duly prescribed in the First Schedule to the Act in respect of the excisable items was always on a high scale. Administration has always proceeded to enforce duty of excise on the footing that the rates prescribed in the First Schedule were generally not to be enforced. lt is for this reason that in connection with the item of cotton fabric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Bleached and/or dyed and/or printed ... ... 32 (c) Mercerised and/or water proofed, whether not proofed or not (including rubberised) ... ... 52 (d) Processed in any other manner including shrink proofed and/or organdie processed ... 67 Exactly similar sub-classification was made and different rates of excise duty were prescribed in respect of the 3 next sub-items, i.e. Cotton Fabrics (1) Medium A and B Fine (2), and Coarse (3). Now, in this matter we are not concerned with the legality or otherwise of the sub-classifications made by Notifications issued under sub-rule (1) of rule 8. Apparently, in respect of cotton fabrics falling into each of the above 4 sub-items different rates of duty were prescribed when the goods were in four different conditions mentioned in each of the four sub-classifications quoted above. Superfine cotton fabrics when grey were liable to pay only 22 paise per sq. metre. These very goods if they were bleached and/or dyed and/or printed were liable to pay 32 paise per. sq. metre. The rate of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty would have to be paid. This larger duty was not intended to be in addition to the duty paid by the manufacturer for grey goods. Similarly, in respect of goods falling into the 4th sub-classification, that is processed in any other manner, including shrink-proofed and/or organdie processed , for which duty was fixed at 67 paise per sq. metre, it was not intended that the duty paid by the manufacturer of grey goods or the processors who manufactured the goods which might have fallen into the 2nd and the 3rd sub-classification, should be recovered once again by charging the whole of the sum of 67 paise per sq. metre prescribed to be levied for the goods falling within the 4th sub-classification. This was made clear when in this Notification, the following was stated : Provided that if duty has already been paid at the rate applicable to the varieties specified in column (2) of the Table below, the fabric specified in column (3) thereof shall be exempt from so much duty as is in excess of the duty specified in the corresponding entry in column (4) thereof. 14. The Table appearing after the above quoted provision is for the purpose of giving credit for the duty already paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sub-classification that is, Bleached and/or dyed and/or printed of cotton fabrics, superfine. The goods so processed by the Petitioner Company were released from its factory upon payment by the Petitioner Company differential duty prescribed in respect of the processed goods. The release was on the footing that the goods fell into sub-item 1 of Item 19 and were superfine cotton fabrics. This was done continuously during tb relevant period that is between May 26, 1966 to November 15, 1967 and even prior thereto. In Connection with this liability to pay duty, there was no dispute between the parties. Now, in January 1968 the Petitioner Company was informed that the goods processed by the Petitioner Company fell into sub-item (5) of Item 19 and were Cotton fabrics, not otherwise specified . This led to the impugned reassessments and the impugned notices of demand. Now Mr. Joshi is right in his submission that the goods falling in sub-item (5) of Item 19, have not been further sub-classified as done in connection with the sub-items (1) to (4) of Item 19. The question accordingly is as to whether, when the Petitioner Company processed the goods which were brought to it by its cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original manufacturers from their factory. The failure, if any, of the excise authorities to recover such duty from such manufacturers can never be recovered from dealers and traders who might deal with the released goods in such a manner as they choose. 17. But Mr. Advani contends and points out the true facts that admittedly in respect of the goods processed by the Petitioner Company the manu- facturer had not been charged duty at the rate of 80 paise as prescribed in the First Schedule. Now, this situation has arisen because it appears from the legislative history in that connection, the manufacturers producing Cotton fabrics and silk fabrics in factories commonly known as powerlooms without spinning plants have been held to be entitled to protection and, therefore, certain reliefs and exemptions from excise duty. In that connection, excise rule 96-I and 96 J were enacted and 96-J in respect of the goods produced by such manufacturers extremely low compounded rates of duty were prescribed by diverse notifications. The prescribed duty of excise was not charged to these manufacturers. There is no dispute that the powerloom goods received and processed by the Petitioner Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons issued under rule 96 J, the original manufacturers were not liable to pay the full duty prescribed under the First Schedule and paid duty only at compounded rates does not make any difference to the above findings. Reference made in this connection to rule 49 appears to be entirely irrelevant. That rule contains the well-known normal provision that duty in respect of excisable goods will not be required to be paid except upon removal of goods from the licensed warehouses. Reliance was placed on rule 56 A which provides for special procedure for movement of duty-paid or countervailing duty-paid materials or component parts for use in the manufacture of finished excisable products. Under this rule, the Collector of Excise is authorised to give relief and credit in respect of the user of duty-paid goods or component parts in manufacturing different alternative excisable goods. Mr. Advani referred to this rule because his case was that the powerloom manufactured goods subsequently processed by the Petitioner Company were stated to have been duty-paid goods. In his submission the Petitioner Company was not entitled to any credit for the duty already collected on grey fabrics process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co in the first instance and cigars, cheroots and cigarettes and Biris in the next instance and the facts of the present case. This is so because by sub-classifications made in item 4, in spite of levy of duty on manufactured tobacco, provision is made for levy of further duty in respect of the same goods when manufactured and sold as cigars and cheroots as well as cigarettes and Biris. In respect of cotton fabrics falling in sub-item (5) of Item 19, sub-classification has not been made in the above manner. 19. It requires to be noticed that if duty was short-levied for any reason in respect of the goods processe by the Petitioner Company, the same could always be charged only on the manufacturers of the goods and not the Petitioner Company who must be treated as ordinary purchasers of the manufactured goods in open market. For the above reasons, the reassessments of the duty against the Petitioner Company for the above period commencing from May 26, 1965 to February 15, 1968 were entirely illegal and without authority of law. Jurisdiction vested in the Excise Authorities for reassessment has been exercised in the manner not warranted by law. Levy of the reassessed duty and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid..... . 23. Apparently, the three impugned notices of demand were addressed to the Petitioner Company and the reassessments were made for the reason that duty was charged to the Petitioner Company in respect of the goods in question on the footing that they fell in sub-item (1) of Item 19, whilst in fact higher duty was payable for these goods as they fell in sub-item (5) of Item 19. The short-levy accordingly was due to inadvertence error or misconstruction on the part of the officer who collected duty or it was due to mis-statement of description of the goods by the Petitioner Company in the A.R.I. form. The claims for such short levied duty were necessarily claims envisaged in rule 10. Provision having been made in rule 10 for recovering duties short-levied, there was no warrant for issuing the notices of demand dated April 12, 1968 and February 16, 1968 (No. 2 of 1968) under rule 10A. Resort to and reliance on rule 10A has been made in the above two notices only because the authority concerned was aware that the three months period mentioned in rule 10, which was in fact ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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