TMI Blog1976 (5) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... moved this application under Article 226 of the Constitution and obtained a rule nisi. It was recorded by this court on 7th May, 1975 that without prejudice to the rights and contentions of the petitioner that the rough-rolled zinc used for punching zinc calots was not sheets or strips within the meaning of Tariff Item 26B(2) the petitioner volunteered to clear in future rough-rolled zinc used for punching calots upon payment of an amount equivalent to the duty alleged to be leviable on such rough-rolled zinc. It was further ordered that all future clearances of rough-rolled zinc shall be allowed upon payment in monthly return in R.T. Form 12 and such payment as aforesaid would be subject to the result of the main rule and in the event of the petitioner succeeding in the main rule nisi the respondents to the rule would refund such amount so paid as might be held not payable as duty in law. In this application under Article 226 of the Constitution the petitioner challenges (i) the order dated 3rd January, 1975 of the Appellate Assistant Collector in which the order of the Assistant Collector had merged as well as, (ii) the notice of demand dated 26th April, 1976 under Rule 9(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 1968 S.C. 922. 9. The duty is on manufacture or production of goods. Manufacture implies a change but every change in the raw material is not manufacture eligible to duty. To be manufacture eligible to duty there must be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the market having a distinctive name, character and use must emerge. Furthermore, in order to be dutiable as one of the items mentioned in the First Schedule to the Act the transformation must result in making the article as one as mentioned in the First Schedule. The specific question, is, whether the operation carried on by the petitioner as indicated before to bring into being the rough-rolled zinc can be considered to be manufacture of sheets or strips in terms of item 26B(2) of the First Schedule. The fact that these are used by the petitioner for production of end product and not sold by it is irrelevant. The item provides as follows :- * * * * 10. There must be definite ascertainable or identifiable test to determine what is mentioned in the Schedule. In the case of Union of India v. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some form or other and in different sizes. The contention was that uncut circles could not be held to be circles as mentioned in the item. The Supreme Court found that the contention was unacceptable in view of the description of the goods in Item 26A of the First Schedule to the Act. The Supreme Court found on evidence that uncut circles were certainly one form of circles. The Supreme Court was further of the opinion that the contention that uncut circles could not form one form of circles not be accepted because in that case there was no evidence that in commercial community uncut circles were not known as circles. Therefore if these were circles known as circles in the commercial community even though these were uncut then in view of the fact that the item which was made taxable was circles in any form or size the uncut circles were liable to be taxed. This decision does not resolve the question whether the rough-rolled zinc automatically becomes strips or sheets in any form or shape. The Supreme Court as mentioned hereinbefore emphasised that there was no evidence that in commercial community uncut circles were not known as circles. By the aforesaid observation the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in interpreting the meaning of the words in fiscal statute where the words are not defined the acceptance of the words by trade and their popular meaning should be the guide and should be taken as the meaning. It is, therefore, necessary to consider whether the respondent authorities have proceeded on the correct basis for determining whether the rough-rolled zinc produced by the petitioners in the manner as described before can be called either sheets or strips If such rough-rolled zinc can be considered to be sheets or strips then in whatever forms these are and in whatever sizes these will be exigible to duty. Counsel for the respondents contended before me that the test of being known in the market as indicated by the Supreme Court in the case of Union of India v. Delhi Cloth Mills Ltd - 1977 E.L.T. (J 199) was not placing the correct emphasis on the nature of the excise duty as had been enunciated by the Supreme Court in its earlier decisions. Counsel submitted that in order to be elxligible to duty sale in the market was irrelevant. Counsel is right in saying that in order to be exigible to duty sale is not relevant but production or manufacture is the only relevant fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re known as such and there are such commodities as sheets and strips. But it was contended on behalf of the petitioner that the specification laid down by the Indian Standard Specification was not the specification in respect of the goods rough-rolled zinc prepared by the petitioner. Such specifications are as follows :- * * * * This specification in my opinion indicated an article by what was commercially known to distinguish it from other goods. But as indicated before the Indian Standards Institution drawn up specifications of the commodities which figure in our home market as well overseas market. Therefore when an item of goods is specified by the Indian Standards Institution, in my opinion, that is certainly evidence of the fact that the said item is known as such in the trade or commerce. The Indian Standards Institution is not dealing with the goodsin future. It must be presumed that these specifications were laying down standards of the goods that are known in the trade or commerce at the present moment. Therefore, when an item is specified in the specifications issued by the Standards Institute, it is certainly a piece of evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afresh in accordance with law and in accordance with the principles indicated in this judgment after taking into consideration all relevant and material evidence. 19. There is another aspect of the matter which must be considered. On behalf of the petitioner it was contended that if rough-rolled zinc was subjected to duty in the manner indicated above, then this would result in repetitive duty which was not permissible. Counsel drew my attention to Annexures `R , `S and `T of the petition where it is indicated how after rough-rolled zincs are produced calots are prepared and after preparation of calots, these very materials, the petitioner contended, would be liable to duty over and over again. In the process of punching calots out of rough-rolled zinc some sizeable scraps come out in the same process. The petitioner produces three major types of calots in the said factory, namely, hexagonal calots, round calots and small size calots. The percentage of scrap generated in the punching of calots is approximately 25% in the case of hexagonal calots, 40% in the case of round calots and 65% in the case of small size calots. The said scraps are remelted according to the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Gujarat High Court in First Appeal No. 128 of 1972 with Special Civil Application No. 97 of 1972 (Under Articles 226 and 227 of the Constitution of India) and First Appeal No. 970 of 1973, The Union of India Others v. C.M.C. India, Ahmedabad. In the view I have taken as mentioned before it is not necessary for me to refer to the decisions in any details. As regards the various points taken in the said 20 points objection I will deal with those points at the relevant time. 21. In the view I have taken for the reasons mentioned before I set aside the order dated the 3rd January, 1975, by the Appellate Collector which is annexure to the present petition, in so far as it held that sheets and strips from which calots are manufactured by the petitioner are assessable to Central Excise duty under Tariff Item 26B(2). So far as he has held that zinc calots are not exigible to duty the same is not disturbed. The Appellate Collector is directed to re-hear the matter to re-determine the question in the manner indicated above after giving reasonable opportunity and until that decision is made, the order of the Assistant Collector which was under appeal before the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed and that amount ought to have been also actually paid. This Rule applied to a case where there had been a nil assessment in which case entire duty later on assessed must be considered to be duty originally short levied. In the circumstances the Rule 10A did not apply. Dealing with Rule 9(2) the Supreme Court observed as follows at page 2048 of the Report : The above reasoning leads to the conclusion that Rule 10A does not apply to the case on hand. Then the question is whether the demands could be justified under Rule 9(2). Even here we find considerable difficulty in sustaining the notice under this rule. Sub-rule (1) of Rule 9 provides for the time and the manner of payment of duty. In this case there is no controversy that whenever goods were cleared by the respondents, necessary applications had been made to the officer concerned and the latter had passed orders of assessment to nil duty. To attract sub-rule (2) to Rule 9, the goods should have been removed in contravention of sub-rule (1). lt is not the case of the appellants that the respondents have not complied with the provisions of sub-rule (1). We are of the opinion that in order to attract sub-rule (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss there was an element of evasion - evasion meaning deliberate not payment with knowledge of the fact that duty was payable, sub-rule (2) of Rule 9 cannot be attracted. In the case of R.K. Audim and others v. Special Steel Ltd., Bombay and another reported in A.I.R. 1971 S.C. page 2049 the Supreme Court dealt with an additional duty sought to be recovered on the ground that the original imposition was at a lower rate but to misapprehension of the Department. In such a case only Rule 10 and not Rule 10A would apply. If, however, in this case Rule 10 was the proper rule to be applied then the fact that the notice was given under Rule 9 (2) would not make the notice invalid, the notice would still be upheld to the extent it is permissible under Rule 10. In support of this proposition reference may be made to the very decision of the Supreme Court in the aforesaid case of N.B. Sanjana Ors. v. E.S. W. Mills Co. Ltd. (supra) and also the case of J.K. Steel Ltd. v Union of India,-A.l.R. 1970 S.C. page 1173. It was contended that Rule 10 would be inapplicable because there cannot be any question of short levy in the instant case because the goods had been removed without payment of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction. But in the notice to show cause why the demands should not be made under Rule 9(2) it has not been alleged that there are any other materials in the possession of the respondent authorities to come to the conclusion that the goods in question have been removed clandestinely. 27. In the affidavit-in-opposition of Ashutosh Pal affirmed on the 14th January, 1976 in paragraph 4(1) it has been stated that after the receipt of the petitioner s letter dated 30th March, 1971 necessary inquiries were made and it was found that the petitioner had purposely misdescribed calots as zinc circles in order to evade payment of higher duty on zinc sheets and strips. It was stated in that paragraph that calots were manufactured by the petitioner out of zinc sheets/strips by way of punching and it was further alleged that the petitioner described calots as circles falling under Item No. 26B (2) in order to evade payment of higher duty on zinc sheets/strips to the extent of the scrap which arose after punching of calots from the zinc sheets and strips. This paragraph has been verified as being based on information from records. No records, however, were produced or officered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h inadvertence of the respondent authorities or because of the misstatement or misdescription of the goods on the part of the manufacturer. If that is the position, then in my opinion, Rule 10 would be applicable. If Rule 10 would be applicable, then the petitioner would be liable for duties for a period of one year prior to the date of the issue of the impugned notice. 31. But the question whether Rule 9, Rule 10 or Rule 10A will apply, is dependent upon the question whether rough rolled zincs out of which zinc calots are punched, are excisable at all. As I have held that the question must be determined or redetermined by the Appellate Collector in the manner indicated above. In my opinion, it would be sufficient to hold for the purpose of this application that the impugned notice under Rule 9(2) is invalid inasmuch as the goods in question had not been removed clandestinely, but the said notice can be treated as notice under Rule 10 to the extent applicable and for the period enforceable provided rough rolled zincs out of which zinc calots are punched, are eligible to duty as zinc sheets or strips. Therefore, until the said determination is made, the said notice will not be gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econdly, that the petitioner had deliberately paid duty on zinc calots in order to avoid payments of higher duty on zinc sheets and strips out of which zinc calots were prepared. There was no question of payment by mistake. It was, then submitted that the assessment in respect of zinc calots had been properly made by the competent assessing authorities and they had juridiction to make the assessment though the assessment might be erroneous. It was then contended that part of the claim held become barred by limitation because the petitioner had discovered the mistake as early as 30th March, 1971 and it was urged that refund should be refused to the petitioner on the ground of unjust enrichment because excise being essentially an indirect tax the manufacturer must have passed on the liability to the consumers and must have realised the duties from the consumer of batteries. Therefore, the petitioner would be doubly enriched if there was order for refund. Lastly it was urged that the claim to obtain refund was controlled by Rule 11 of the Central Excise Rules and as such the rule limited the claim only to a period of three months. In aid of this submission several decisions were relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elay in approaching the High Court. 33. In this case as I have mentioned before, one of the main contentions was that there deliberate attempt on the part of the petitioner to avoid payment of higher duty on zinc sheets and strips. I have held that there is no material for the issue of notice under Rule 9(2) of the Central Excise Rules on the aforesaid basis, still I cannot ignore this as an aspect to be considered in a claim for, refund. On the question of undue enrichment reliance was placed on the observations of Masud, J in the of Electric Lamp Manufacturers India Private Ltd. v. Collector of Central Excisc, Calcutta-1978 E.L.T. (J 84). Of course the facts of the instant case are different from the facts in that case, inasmuch as there was positive evidence that the manufacturer had realised duties from the consumers, such evidence is not available in the instant case but it may be presumed that though as a matter of law excise duty is payable by the manufacturer, as a matter of fact it is passed on to the consumers. But that in my opinion is no ground to invoke the theory of unjust enrichment. If unjust enrichment is not to be permitted to a litigant, it should not also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to. (3) If it is ultimately held by the Appellate Collector that rough-rolled zincs out of which calots are punched are not dutiable then the said demand notice and the said show cause notice in respect of the demand notice should not be given effect to any further and the petitioner would be entitled to take such steps as it would be entitled to under the law to claim refund of duties paid for zinc calots, including applying to the respondent authorities for claiming such refund. And in that even the respondent authorities would consider such application in accordance with law. (4) If, on the other hand it is held that rough-rolled zincs out of which zinc calots are punched are assessable to duty then the demand notice for the same dated 26th April, 1974 in so far as is within the period covered by Rule 10 from the date 26th April, 1974 would be enforceable against the petitioner. But before enforcing the same, the respondent should give credit to the petitioner for the amount realised from the petitioner on account of duty for zinc calots. (5) In case it is held that rough-rolled zincs out of which calots are made are exigible to duty then classification list made ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
