TMI Blog1972 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... `J' to the petition), and 31-10-1969 (Exhibit `K' to the petition); (b) for issue of a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or orders against the respondents, their officers, subordinates servants and agents directing them (i) to withdraw and/or cancel the impugned orders dated 14th June, 1965 in so far as it rejects Claim IB and Claim 2 (Exhibit `H' hereto) 3rd September, 1965 (Exhibit `I' hereto) 22nd March, 1966 (Exhibit `J' hereto) and 31st October, 1969 (Exhibit `K' hereto), and further directing them (ii) to refund to the petitioners Rs. 50,25,027.85 illegally collected as excise duty. 2. The impugned orders relate to the claims made by the petitioner for refund of excise duty earlier paid by the petitioner allegedly by mistake or misapprehension or on an incorrect interpretation of the relevant law on what the petitioner describes as Burner Fuel Oil, the duty whereon was charged treating it to be a finished product, called Furnace Oil. The total amount claimed by the petitioner was Rs. 49,47,047.13. The claim of the petitioner company having been rejected, it has now filed the present petition for quashing the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claims 1A, 1B and 2) on 14th August, 1964. 5. Claim 1A was in respect of excise duty paid on oil transferred from the Crude Unit directly and not via propane. Decarbonization Unit (hereinafter called the 'P.D Unit') to Burner Fuel Oil Tanks Nos. 170 and 171 (hereinafter called 'Tanks 170 and 171'). The amount under this claim was Rs. 24,22,547.14 and the refund claimed was for excise duty paid from 1st January, 1957 to 31st July, 1963. 6. Claim 1B related to excise duty paid on transfers of oil from P.D. Unit only to tanks 170 and 171 declared at the time of payment of duty as Low Sulphur Furnace Oil. The amount claimed under this head was Rs. 4,79, 844.67 and the period for which the refund was claimed was July, 1959 to 31st December, 1960. Claim No. 2 related to excise duty on transfer of Oil from the Bonded Blending-cum-Storage Tanks to tanks Nos. 170 and 171. The amount claimed under this head was Rs. 20,44,655.32. The period for which refund was claimed under this head was from 1st January, 1957 to 31st July, 1963. 7. The three claims were duly considered by the Assistant Collector at Visakhapatnam. On 14th June, 1965 the Assistant Collector, Visakhapatnam passed his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Intermediate Non-marketable Fuel Oil may also be sent to the Bonded Tank via the P.D. Unit either for being transmitted as such to Tanks 170 and 171 or for marketing the same after adding to it what is called, Cutter Stock without adding which, according to the petitioner, the oil is not marketable, due to a high viscosity, but can be used and has been used internally for heating the plant of the petitioner to produce various marketable products. According to the petitioner it paid excise duty on such oil stored in Tanks 170 and 171 on its transmission either directly from the Crude Unit or from the P.D. Unit or from the Bonded Tank, which it was not liable to pay inasmuch as in that state the oil was what is described as Burner Fuel Oil and not Furnace Oil. 9. The learned counsel for the petitioner formulated seven propositions requiring court's determination. These may be summarised as follows :- 1. Expressions used in the Excise Act must be understood in the commercial or the trade sense and not the scientific or laboratory sense. According to trade and market, Furnace Oil is only that mineral oil which is of low viscocity grade i.e. 540-630 seconds by Redwood I Visco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to excise duty. So, the duty was rightly collected, the moment it was removed from the place of manufacture within the meaning of Rules 9 and 49 of the Central Excise Rules; and the petitioner had always treated the same to be a removal attracting the payment of excise duty. It is also contended that at no time was any specific claim of the petitioner allowed and all the three claims were rejected after due inquiry and proper hearing. The counter-affidavits filed on behalf of the respondents also set out that the refinery or the manufacturing unit of the petitioner is the specified place of manufacture under Rule 9 of the Excise Rules and that Tanks 170 and 171 are outside the manufacturing unit which are not within the control of the Excise Authorities. Considerable stress is laid on the petitioner's own conduct in filing necessary declarations on what are called A.R. 1 forms that the oil question was Furnace Oil which attracted levy of excise duty. ***** 14. Mr Soli Sorabjee who opened the case for the petitioner formulated the 7 propositions which, according to him; arose for consideration in this case. Mr Palkhiwala who took over, however, primarily pressed only propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of the end product. It is not obtained by a distinct or independent process which comes to an end when this product is produced. There cannot be any duty levied at stages of a single process and the duty is leviable or can be collected only on the end product. Even if duty becomes leviable the stage for collecting the duty is not reached or, in other words, no assessment of duty takes place till a product is removed. Thus, though duty may be leviable it cannot be collected till the product is removed. Therefore, what has to be seen is whether the commodity in the present case attracts the levy of excise duty and even if it does whether there was removal within the meaning of the Excise Act and the Excise Rules for collecting excise duty or what may be called assessment of duty which becomes payable by the manufacturer. 17. The legislative intent for levy and collection of excise duty, on a reading of the Excise Act and the Excise Rules, appears to be that no duty is payable on intermediate products if the intermediate products by themselves are not the end products being manufactured by a particular factory provided however, the intermediate products and the end products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Removal is a positive act and cannot have any reference to disappearance of the product. For example evaporation would not be removal for that takes place by natural causes in the process of manufacture or even afterwards. Similarly, waste of product while in the pipe-line or in storage may take place on account of natural causes or otherwise. We have, therefore, to see whether in the present case the product in question is (a) only an intermediate product obtained in the process of manufacturing of any other finished petroleum product, (b) whether this product is treated as an end product or only an intermediate product by processing of which any other product is to be obtained, and (c) whether this product can be regarded as having been removed at any stage for any of the purposes mentioned in Rule 9 of the Excise Rules. 18. We have already noticed earlier how the product in question is obtained from crude oil. There can be no doubt that if this type of oil is first sent to the P.D. Unit and from there to the Fluid Catalytic Cracking Unit and on being blended with cutter stock is marketed as Marketable Fuel Oil, it will be a part of a continuous uninterrupted process of manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct. 20. It was urged that oil used for heating purposes it really self-generating fuel obtained in the process of manufacture of various petroleum products and even if it is consumed for heating, it is part of an integrated uninterrupted continuous process of manufacture, for the self-generating fuel is a necessity for the running of the plant in order to make an end product the process of manufacture must come to an end if the entry of this oil in tanks 170 and 171 amounts to a stage of production coming to an end it would mean that one process terminates and another has to start. This, according to Mr Palkhiwala, does not happen for the oil in question is consumed for manufacture of the same commodity and not any other commodity. Production, according to him, must be given the commercial meaning of the term or as in Cost Accountancy net produce has to be taken into account and not what all is produced for part of the product may be utilised for production of the product which can qualify for being called a product commercially produced. There may be something in what the learned counsel says but excise duty is attracted on all excisable goods which are produced as and when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into any other product and its production come to an end once it reached tanks 170 and 171. Whether there would be a removal in this case is a different matter to which we shall presently advert but it cannot be said that the oil in question can be equated to Polymer Chips in the Bombay case. 22. Reference was then made to the decision of a learned Single Judge of this Court in Civil Writ No. 115-D of 1963, J.K. Synthetics Ltd., Kota v. The Collector of Central Excise, Delhi, Central Revenue Buildings, Mathura Road, Delhi, decided on 28th August, 1979. This was a case in which the petitioner company which has a factory at Kota for manufacturing Nylon-6 Yarn was assessed to duty on the import of `Caprolactum' under Item No. 28 of the I.C.T. and the end product i.e. Nylon-6 Yarn was again assessed to Central Excise Duty. The imported Carprolactum has to be first ploymerised and from the polymerised chips thus obtained the Nylon yarn is manufactured. The Polymer Chips are not sold as such in the market and the petitioner used the same entirely in the process of manufacture of Nylon yarn. It was contended that the Polymer Chips could not be regarded as plastics not otherwise speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion into another stream of production or if the product is issued out of or taken out or consumed if no further processing of that product is to be done. The Rule also contemplates that consumption within the place of manufacture would also amount to removal. The consumption of the product contemplated by Rule 9 is consumption of the product by itself and not for converting it into another product, as in the case of Polymer Chips. The integrated continuous process contemplated by Rule 9 read with Rules in Chapter 7A comes to an end when no further processing is to be done of that particular product and thereafter if such product is utilised for consumption or what in excise parlance is known as "home consumption" or exported or used for manufacture of any other commodity in or outside the place of manufacture the excise levy is attracted. We cannot persuade ourselves to agree with the contention raised on behalf of the petitioner that the consumption of this oil for heating purposes is part of the process of manufacture and no removal takes places from the plant. The moment oil goes out of the pipe-line for consumption as fuel for furnaces and not for being converted into any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. We may mention one other point which was urged on behalf of the petitioner and that is that claim 1A having been allowed by the order dated 14th June, 1965 the same could not be rejected by the order of another Assistant Collector passed on 3rd September, 1965. The contention is that the statute gives no power of review to any officer and so the order of 3rd September, 1965 was without jurisdiction inasmuch as this order could not review the earlier order dated 14th June, 1965. In this behalf our attention was invited to the decision of the Supreme Court in Harbhajan Singh v. Karam Singh and Others, A.I.R. 1966 Supreme Court 641. It was held in construing the scheme of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948 that inasmuch as no court or authority has power of setting aside an order which has been properly made unless it is given by statute, an order once made by an authority cannot be reviewed unless there is a specific provision giving the power of review. If the order of 3rd September, 1965 amounts to a review of the order dated 14th June, 1965 as far as it relates to claim 1A then no doubt it must be set aside but in our view the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Appellate Authority or the Revisional Authority. 27. Mr. G.L. Sanghi, who appeared for the Collector of Excise raised some technical objections to any relief being granted to the petitioner. These are not very relevant in the view that we have taken but all the same we may briefly notice the same. 28. The first contention on behalf of the Collector was based on Rule 11 of the Excise Rules which provides that no duties or charges which have been paid or have been adjusted in an account current maintained with the Collect-or under Rule 9 and of which repayment, wholly or in part, is claimed in consequence of the same having been paid through inadvertence error or misconstruction shall be refunded unless the claimant makes an application for such refund within three months from the date of such payment or adjustment, as the case may be. Admittedly, the various amounts claimed had been paid more than three months prior to the lodging of the claim. It was therefore, urged that inasmuch as the petitioner's case is that it paid the amount through inadvertence, error or misconstruction and the application for refund has been made more than three months from the date of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner lost no time in preferring a consolidated claim. The authorities concerned also did not invoke Rule 11. In that view of the matter we cannot reject the contention of the petition outright on the basis of Rule 11 or on the ground of laches and delay. A suit for recovery of the amount may today be barred and may tend to bar the remedy under Article 226 of the Constitution also keeping with the rule laid down by the Supreme Court in Tilokchand Motichand Others v. H.B. Munshi Another, 1969 (2) S.C.R. 824 but then the circumstances of the case in which the applications for refund were invited have also to be kept in mind. Therefore we are not inclined to reject the petition on these technical objections. Indeed, as was observed by a Bench of the Patna High Court in Rohtas Industries Ltd. v Union of India, A.I.R. 1967 Patna 363, section 40 sub-section (2) of the Excise Act bars the institution of any suit or legal proceedings only when such a suit or legal proceedings relates to or is directed against anything done or ordered to be done under the Act and Rule 11 is attracted only if there is inadvertence, error or misconstruction and may not be attracted if refund is claime ..... X X X X Extracts X X X X X X X X Extracts X X X X
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