TMI Blog1978 (1) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... the mills", carry on inter alia the business of plasticizing amongst other articles cotton fabrics and manufacturing P.V.C. (PolyVylyn Chloride) leather cloth. 3. Prior to the financial year 1968 the Item of cotton fabrics was liable to excise duty at the rate prescribed in Item 19 of Schedule I to the Central Excises and Salt Act, 1944 (hereinafter referred to as "the said Act"). It is unnecessary for the purposes of this appeal to reproduce the whole of the said Item No. 19. Suffice it to say that under that Item 'cotton fabrics" meant all varieties of fabrics manufactured either wholly or partly from cotton including various articles made from cotton and specified in the said item. From this definition of cotton fabrics as given in Item 19 certain fabrics containing certain percentage or more by weight of wool, silk, rayon or artificial silk were excluded. The rates of duty prescribed by the said Item 19 were dependent upon different average count of yarn in different varieties of cotton fabrics and was levied per square metre. Under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government has the power by notification in the Official Gazette to exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation III to the said notification provided that "Impregnating or coating of cotton fabrics with preparations of cellulose derivatives or of other artificial plastic materials, if the resultant fabrics fall under Item No. 22B of the First Schedule to the Central Excises and Salt Act, 1944, shall not be treated as processing of cotton fabrics." Consequent upon the introduction of the said Finance Bill in Parliament and the issue of the aforesaid and other notifications, the Collector of Central Excise issued a trade notice which is dated February 29, 1968. In that trade notice the Collector stated that by the new Finance Bill and the said notifications changes had been made in the rates of duty and exemptions granted in respect of various excisable commodities and that six new commodities had also been brought under excise control. The said trade notice further went on to state that by the said Finance Bill excise duty had been imposed for the first time on six items, mentioned therein which were included in the description of goods given in Item 22B. The trade notice further went on to say that "The changes effected by the Finance Bill as well as the said notifications came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the goods mentioned in Ex. E unless duty under the said Item 22B of the First Schedule to the said Act was paid by them and he did not accept the contention of the mills that the said goods also had been fully manufactured before the midnight of February 29, 1968. 6. On March 14, 1965, another trade notice was issued by the Collector of the Central Excise, Bombay. That notice inter alia stated that with the introduction of the new Item No. 22B textile fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic material, artificial leather cloth or rexine with textile fabrics backing which was chargeable to processing duty as for processed fabrics subject to the percentage laid down regarding the fabrics content of the finished product would no longer be classified under Item 19 or 22 of the First Schedule to the said Act but would attract 25% ad valorem duty under the said Item 22B. The said trade notice further stated that stocks of new excisable commodities at the midnight of 29th February/1st March, 1968 in a fully manufactured condition even if lying within the precincts of producing factories would not be dutiable provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise, Bombay Division IV, taking up a contention wholly contrary to what had been stated by the Collector of Central Excise in the said trade notices referred to above as also in the earlier affidavit in reply of A. J Butler. It was contended that what was done by the insertion of the said Item 22B was not to introduce a new excisable commodity in Schedule I to the said Act but was to re-classify Item 19. It was contended that by the insertion of the said Item 22B what was altered was the rate of duty imposed on the type of goods described in the said Item 19. Before Rege J. who heard the petition of the mills the main argument centred round the question whether the said Item 22B was new head of excise duty created for the first time by the Finance Act of 1968 or was a re-classification of the said Item 19. Rege J. negatived the contention of the appellants that the said Item was re-classification of Item 19, and held that a new head of excise duty was created for the first time by Item 22B of the said Finance Act. In the view that he took the learned Judge thought it unnecessary to decide the other questions which arose in the petition. He further opined that even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding any process incidental or ancillary to the completion of a manufactured product. In four sub-clauses that clause then sets out certain processes which in relation to different categories of goods would be included within the statutory definition of the term "manufacture". We are not concerned with these sub-clauses. Chapter II of the said Act deals with levy and collection of duty and Section 3 in that chapter is headed "Duties specified in the First Schedule to be levied". Sub-section (1) of section 3 provides as follows :- "There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India, and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule." 11. Section 4 provides for determination of value for the purposes of duty. Under that section where any article is chargeable with duty at a rate dependent on the value of the article, such value is to be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold at the time of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in these Rules or as the Collector may require, and except on presentation of an application in the proper form and on obtaining the permission of the proper officer on the form............. " Rule 9A (1) provides as follows :- "9A. Date for determination of duty and tariff valuation.- (1) The rate of duty and tariff valuation, if any, applicable to any excisable goods shall be the rate and valuation in force. (i) in the case of goods cleared from the premises of a curer on payment of duty, on the date on which the duty is assessed; and (ii) in the case of goods cleared from a factory or a warehouse subject to sub-rules (2) and (3), on the date of the actual removal of such goods from such factory or warehouse." Relying upon these statutory provisions Mr. Dhanuka submitted that under Section 3 the duties of excise at the rates set forth in the First Schedule were to be levied and collected in such manner as may be prescribed by the Rules. According to Mr. Dhanuka levy as well as the collection of excise duties were to be prescribed by the Rules. He further submitted that these were Rules which had to be published in the Official Gazette and that these Rules had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture or production of goods which attracts duty. The scheme of the Act is that a duty of excise is levied on certain goods which are specified in the First Schedule to the Act. The qualifications so far as the classes of goods on which the duties are levied are two, namely - (1) that they must be specified in the First Schedule as being subject to a duty of excise and (2) they must be produced or manufactured in India. Section 3 does not itself specify the point of time at which the duty is to be levied or imposed. It requires the levy of the duty and the collection of the amount of duty to be prescribed by the rules. The combined effect of Section 3 and Rules 7, 9 and 9-A so far as the present case is concerned, is that in the case of the mills the duty was attracted on the goods in question on the date of the actual removal of the goods from the mills' factory. The point of time at which we have to see whether the goods were liable to duty would be thus the date of removal of the goods from the factory or warehouse and not the date of manufacture or production, for the date when the goods were sought to be removed from the factory or of warehouse they were goods of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Mr. Parekh, learned Counsel for the respondents, however, submitted that from the very nature of excise, a duty of excise was levied only on the manufacture or production of goods and that any other stage which might be provided for under the Act was merely the stage at which the amount of duty was to be collected and not the point of time at which the duty was attracted. The first time that the question of the nature of a duty of excise came up for consideration in this country was in the case of In re : The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, 1978 E.L.T. (J 269) = A.I.R. 1939 F.C.I. This was a reference made by the Governor General under Section 213 of the Government of India Act, 1935 to determine the validity of the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938. Gwyer C. J. in his judgment traced the history of excise duty as follows : "Its primary and fundamental meaning in English is still that of a tax on articles produced or manufactured in the taxing country and intended for home consumption. I am satisfied that is also its primary and fundamental meaning in India; and no one had sugg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. Whether in particular case the tax ceases to be in essence is an excise duty, and the rational connection between the duty and the person on whom it if imposed ceased to exist, is to be decided on fair construction of the provision of a particular Act." 15. Mr. Parekh, however, placed considerable reliance upon certain observations to be found in the majority judgment of the Supreme Court in In ret Sea Customs Act (1878) Section 20(2) A.I.R 1963 S.C. 1760. This was reference by the President of India under Article 143(1) of the Constitution relating to the true scope and interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y can be imposed in respect of these goods at any subsequent stage subject to the qualification laid down by the Federal Court, the Privy Council and the Supreme Court that such levy does not impinge upon the exclusive legislative power of the State Government. 17. Mr. Parekh next relied on a judgment of a Division Bench of this Court in M.S. Shawhney v. Messrs. Sylvania and Laxman Ltd., (1975) Bom. L.R. 380. This was a case under the Customs Act, 1962 and the question which fell for Court's consideration was whether and when there was notification under Section 25(1) of the said Act granting exemption to glass tubes used in the manufacture of fluorescent lamps, from customs duty, which was to expire on March 31, 1967, the goods imported before the date of expiry but in respect of which the bill of entry was filed after the date of expiry, were entitled to such exemption. On consideration of the relevant sections of the said Act that Court held that under Section 12(1) of the Customs Act, 1962, chargeability in respect of levy of customs duty arose when the goods were imported into India and that by the combined effect of the definitions of the words "import" and "India" under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to pay the duty of excise. In this view that we take we find it unnecessary to consider or decide the other contentions raised in this appeal namely, that Item 22B did not introduce a rew head of excise duty, but provided merely for alteration in the rate of duty or the contention that the goods were not completely manufactured prior to 29 February, 1968. 20. In the result, we allow this appeal and set aside the order appealed against and dismiss the petition filed by the mills. For the sake of clarification and in order to leave no scope for any controversy hereafter we may add here that the orders of assessment against the mills assessing their goods under Item 22B passed after the filing of the petition and which were vacated by Rege J., are hereby restored. During the pendency of this appeal by an order dated December 19, 1973 the appellants have deposited in this Court a sum of Rs. 55,000/- which had been invested. This sum will be returned together with the accrued interest to the appellants. 21. This writ petition was necessitated by wrong interpretation communicated to the mills by the aforesaid two trade notices of the Collector of Central Excise, Bombay. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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