TMI Blog1986 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 and 26AA respectively of the First Schedule to the said Act. The duty leviable under the said Act was exempted from time to time either wholly or in part under the various notifications issued under the provisions of the Central Excise Rules, 1944 (hereinafter referred to as the said Rules). During the period when the duty was exempt only in part, the Central Excise authorities levied and collected duty on Cast Iron Rolls under Item No. 25 and Cast Steel Rolls under Item No. 26AA. 3. Cast Iron Rolls are being manufactured by the petitioner since the year 1968 and cast steel rolls since the year 1969. Till March 1, 1975 it was the admitted position that cast iron rolls and cast steel rolls were classifiable under Item No. 25 and Item No. 26AA respectively of the First Schedule to the Central Excises Salt Act. 1944 (hereinafter referred to as the said Act). On the aforesaid basis exemptions under notifications No. 74/62 C.E. dated April 24, 1962 and 133/65 C.E. dated August 20, 1965 were granted to the petitioner in respect of cast iron rolls and cast steel rolls respectively. 4. On March 1, 1975 item No. 68 was inserted in the First Schedule to the said Act providing for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Act were amended. Section 36 of the Act under which the said notice dated September 10, 1981 was issued has been substituted. In respect of proceedings which had already been initiated under the unamended Section 36 of the Act, the amended provisions provide for transfer to and hearing of such proceedings by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the Tribunal). 9. The validity of the said notice dated September 10, 1981 and the proceedings initiated thereunder has to be judged with reference to the provisions of Section 36 of the Act as it stood at the time of initiation of the said proceedings. The substituted Section 36 has no application. 10. It is contended by Mr. R.N. Rajoria learned Advocate appearing for the petitioner that the said notice dated 10th September, 1981 issued by the Government of India is wholly illegal, invalid and without jurisdiction inasmuch as none of the conditions precedent for assumption of jurisdiction under Section 36(2) of the said Act exist and/or has been complied with. It is contended that unless there are materials on record for assuming jurisdiction under Section 36(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, the High Court cannot quash the notice issued under section 36(2) of the Act. It is contended that this Court is not concerned with the merits of this case but would only consider whether Central Government on the date it had issued the said notice had jurisdiction or power to issue such a notice revising the order of the Appellate Collector. 13. I am, however, unable to accept this contention. Under Section 36(2) of the said Act, as it is stood at the relevant time, the Central Government was empowered to call for and examine the records of any proceeding in which any decision or order was passed under Section 35 or Section 35A for the purpose of satisfying itself as to the correctness, legality or propriety of such decision or order and to pass such order thereon as it thought fit. It is therefore evident that there are certain conditions precedent to be complied with for assumption of jurisdiction under section 36 of the said Act. The condition is that no proceeding under section 36(2) could be initiated unless on proper materials and reasons and on examination of the records of the proceedings the Government could be satisfied that the order sought to be revised is not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been affirmed by the Additional Secretary, the respondent No. 1 who issued the impugned notice. It is affirmed by the respondent No. 4, the Assistant Collector of Central Excise on behalf of all the respondents. The material averments made in the said affidavit are based on information derived from records. When the said affidavit was affirmed on 20th July, 1983 the deponent did not have the record relating to the issuance of the impugned notice. Even then the said deponent affirmed the affidavit stating therein that the information was derived by him from the records when admittedly the relevant records were not before him. 16. In the file which has been produced before this Court there is nothing to indicate that there was any material to arriving at the alleged satisfaction for initiation of the said proceedings under Section 36(2). There is no document or evidence in the said file on the basis whereof the alleged satisfaction for issuing the said show cause notice could be arrived at. If the Court comes to the conclusion that the show cause notice itself is without jurisdiction, the Court has the power to set aside such a notice. If the Court does not interfere at this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of East India Commercial Co. Ltd. v. Collector of Customs reported in 1983 E.L.T. 1342 (S.C.) = AIR 1962 SC 1898' has observed at page 1903 thus : "If on a reading of the said notice it is manifest that on the assumption that the facts alleged or allegations made herein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently if on a true construction of the said two sections, the respondent has no jurisdiction to initiate proceeding or make an inquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceeding with the same." In Manoj Tin Containers v. Union of India and Another reported in (1984). SCC 386 Division Bench of the Madhya Pradesh High Court held that if the Assistant Collector had no jurisdiction to issue the notice impugned there, even though an alternative remedy was available the writ petition could be entertained. 19. The preliminary contention of Mr. Roy Chowdhury therefore, must fail. 20. I shall now turn to the merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The molten metal is thereafter allowed to cool down and after cooling down it gets solidified. The foreign materials, runners and risers etc. are thereafter removed from the rolls. The rolls are then fettled and rough turned. However, the castings in the aforesaid stage are generally not saleable in the market and to make them saleable same finishing and polishing work has to be undertaken. Such iron castings, however, continue to remain in crude form. This according to the petitioner is the process of manufacture of cast iron rolls. Similar is the process of manufacture of cast steel rolls. The said process has not been disputed by the respondents. In paragraph 12 of the petition it has been stated by the petitioner that the cast rolls cleared from the factory of the petitioner are and continue to remain castings. The finishing and/or polishing work undertaken at the factory of the petitioner to remove foreign materials, runners and risers etc. does not and cannot make or convert the said castings into machine parts. The said processes are undertaken only to make the castings marketable. The customers of the petitioner in fact have to convert the said castings into machine parts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess incidental or ancillary to the completion of the manufactured product. In so far as the castings are concerned, the same are not marketable in the condition in which they come out of the moulds. The castings at this stage are not finished castings. For making the said rough substance coming out of the moulds a marketable product, finishing operation has to be undertaken. In such finishing operation some machining work is also involved. Foreign materials, runners, risers etc. have to be removed from the said rough substance and the polishing work is also to be undertaken. However, due to the aforesaid there is or can be no question of the castings being converted into an identifiable machine part. The said finishing/polishing operations are undertaken only to complete the manufacture of the castings. Such finished cast iron rolls and cast steel rolls are known and dealt with in the market as cast iron rolls and cast steel rolls respectively. The said products are never known, dealt with or regarded in the market as finished machine parts. For making machine parts out of the said cast iron rolls and cast steel rolls manufactured at and cleared from the factory of the petitioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Co. Ltd., in their letter dated 26-9-1977, produced by the appellant during the personal hearing, have further stated that the bulk of their requirement of rolls of these qualities are obtained from M/s. Tayo Jamshedpur. These rolls are manufactured by castings process and the manufacturers machines the journals and driving end of the rolls only. Any size of rolls of any quality used in any types of Mills would require subsequent machining, grinding and other operations at the user's end to make them suitable for use in the Mills. For this, we are to maintain a separate department 'Roll Turning Shops' with sub-sections manned by highly skilled staffs and workers for effecting these jobs to make the rolls suitable for use in the Mills. As such, the rolls as supplied by the roll manufacturers are never a finished product for the Rolling Mills and it can never be used as they are obtained from roll makers." 26. It is thus evident that the steel plants who mainly buy the said cast rolls from the petitioner and similar other manufacturers of cast iron rolls and cast steel rolls have to maintain huge workshops for manufacture of the machine parts according to their requirements out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by the said items, must not be subjected to any process or that they should be rough castings as they came out of the mould. If a product is iron casting, the same would be covered by the item No. 25 alone and if a product is still casting the same would be covered by the item No. 26AA alone. The fact that such casting is capable of being used as a machine part does not alter its basic character as castings. Item Nos. 25 and 26AA do not provide that castings which can be used as machine parts would not be castings under the said Tariff Items. On the other hand the said items seek to include castings in any shape or form. The cast iron and cast steel rolls are admittedly iron castings and steel castings respectively but according to the respondent No. 1 after machining and polishing it ceases to be so and acquires a distinctive shape and character as machine parts. The said products cannot be taken out of the purview of the Item Nos. 25 and 26AA as castings even if any machining is done. The basic fact is that the said cast iron rolls and cast steel rolls are made by the process of casting and the same are iron castings and steel castings which can be covered only by item No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view I have taken is supported by the decision of the Patna High Court in the case of Tata Yodogwa Limited v. The Assistant Collector of Central Excise reported in 1983 E.L.T. 17. There the question before the Patna High Court was whether the Steel Castings are liable to duty under Item 26AA(V) of Central Excise Tariff or under Item 68. Patna High Court was of the view that merely because some machining or polishing is being done on the products, the basic character of such products as castings does not alter. It was further held in the said decision that item No. 26AA does not speak about semi-finished or finished castings and that since the manufacture is not complete until all the processes incidental or ancillary to the completion of the manufacture have been carried out, it cannot be said that semi-finished castings are excisable as Castings and after cleaning, machining and polishing the same are again liable to duty under item No. 68. 32. The Patna High Court observed thus: "According to the appellate authority, if at the time of casting the end use of that casting as part of a certain machinery is already known, duty is payable as identifiable machine part. If that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifications according to customers' order are manufactured. Had that been the case, perhaps duty would have been payable when the casting was taken out of the mould. In this case the whole process from the start to the finish must be held to be 'manufactured' within the meaning of the Act. At no stage the goods become anything other than an item to be classified under Item to be classified under Item 26AA(V). Since there is no difficulty in this case for classifying the goods in question, the respondents cannot take recourse to the residuary item i.e. Item 68 as has been laid down by the Supreme Court in Dunlop's case (Supra). For the reasons aforesaid, it must be held that the goods in question manufactured by the petitioners is steel castings excisable under Item 26AA(V) and at no stage it becomes excisable under Item 68." 33. This decision fully supports the contention of the petitioner. Mr. Roy Chowdhury, the learned Advocate for the respondents has submitted that Special Leave Petition has been filed before the Supreme Court against the said judgment of the Patna High Court. He has submitted that it is a question of fact whether the end-product as commercially known fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es undertaken by the petitioner in manufacturing the cast rolls. On the other hand, the processes described by the petitioner have not been disputed. There is, therefore, no question of finding out the actual manufacturing processes undertaken by the petitioner. If it is contended that it is a question of fact, in that event, the finding given by the Tribunal in different cases against the Excise Authority would be binding on them. There cannot be different processes undertaken in the manufacture of cast iron or cast steel rolls by different manufacturers. The steel plants who are consumers of the products manufactured by the petitioner and other similar manufacturers have also categorically stated the process undertaken by them for the purpose of making the casting into identifiable machine parts. 35. My attention has been drawn to several decisions of the Tribunal where the Tribunal found that cast iron rolls have no doubt undergone some machining and polishing after these are taken out of the moulds but such processing are incidental and ancillary to the completion of the casting iron in any other shape or size and for the purpose of converting cast iron into identifiable mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er processes of annealing, straightening, buffing and rough machining and surface protection by metallic or non-metallic coatings in the foreign country before being shipped to India. They stated that after these processes, the goods ceased to be mere iron cast in any shape or size and became semi-finished articles which were not covered by item 25 CET. Since there was no other item of the CET covering such goods at the material time, the goods were free from countervailing duty. The Department's representative stated that the further processes which the goods underwent in the foreign country were not such as would convert that into another identifiable articles and that the goods still remained iron castings only. He added that the expression "iron cast in any other shape or size", being a general one, would include all varieties of iron castings (ECR 1983-65 D-BOM). "We have carefully considered the matter. We agree with the Department's representative that the further processes mentioned by the appellants which the subject goods reportedly undergone in the foreign country are such as would not convert iron castings into another identifiable article and these processes are in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondents that in the decisions rendered by the Tribunal, the Tribunal did not take into account the material evidence. Nor has it been suggested what new materials should have been taken into consideration in this case. This argument, therefore, has no substance. 42. It is then contended by Mr. Roy Chowdhury that the petitioner in effect has challenged the classification of the products and no writ would lie in such a case. He has submitted that test has been laid down by the Supreme Court to determine whether a product is liable to duty and what is manufactured which would depend upon the facts of each case and the matter has to be heard and considered by the Tribunal. He has relied on the decisions of the Supreme Court in Empire Industries Ltd. v. Union of India reported in 1985 (20) - E.L.T. 179 = 1985 (3) SCC 314 and Khandelwal Metal Engineering Works Another v. Union of India Others reported in 1985 (20) E.L.T. 222 (S.C.) = 1985 (3) SCC 620 in support of his contention that etymologically the word "manufacture" would cover the case of transformation and whether by such transformation a different commercial commodity having a distinct character, use and name and commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia and others reported in 1981 E.L.T. 147 Bombay High Court held that it is well settled that if adjudicating authority in customs or excise matters have preferred one of the possible meanings or placed a product in one category which could perhaps be better placed in another, the court should not ordinarily interfere. But, if the adjudicating authorities have given a strained meaning to an expression used in ordinary parlance or acted in a manner not warranted by settled rules of interpretation then the court has not merely the right to interfere but also a duty. 46. In Navin Chamanlal Sutaria v. Union of India and others reported in 1981 E.L.T. 913 Bombay High Court held that if the departmental authorities did not go to the root of the matter before deciding the classification of a product, it clearly amounts to non-application of mind which merits interference by the High Court under Article 226 of the Constitution. 47. In the case of T.I. Miller Ltd. v. Union of India Anr. reported in 1984 ECR 1977 Madras High Court held that in a matter of classification, the court has always adopted the principle that under writ jurisdiction it could examine the correctness of a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd should have allowed the assessee to avail of the remedies provided to him under the U.P. Sales Tax Act, particularly when question of fact had to be determined. In the instant case, the question as to what is the true connotation of the words "sanitary fittings" and whether the hume pipes manufactured and sold by the respondent were sanitary fittings within the meaning of that expression was a question of law and since the entire material on the basis of which this question could be determined was placed before the Sales Tax Officer and it pointed in one and only one direction, namely, that the hume pipes were not sanitary fittings and there was nothing to show otherwise, the High Court'' was justified in entertaining the writ petition. Moreover, there is no rule of law that the High Court should not entertain a writ petition where an alternative remedy is available to a party. It is always a matter of discretion with the Court and if the discretion has been exercised by the High Court not unreasonably or perversely, it is the settled practice of this Court not to interfere with the exercise of discretion by the High Court. The High Court in the present case entertained the writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is impracticable to do so." 55. Bombay High Court in Maharashtra Vegetable Products Pvt. Ltd. v. Union of India reported in 1981 E.L.T. 468 observed at page 473 thus: "We are unable to read the decision in Cawasji's case as an authority for the proposition that in every case, where the manufacturer who has paid the Excise Duty and has passed it on to the consumers and has recovered it, the claim to recover monies from the Government should be rejected." 56. The Division Bench after carefully analysing Cawasji's case observed at page 474 thus:- "It appears from the judgment of the Supreme Court that the fact that the appellants had not given any reason as to why that claim was not made in the earlier writ petition heavily weighed with the Supreme Court when they declined to interfere with the decision of the High Court. We are, therefore, unable to accept the contention advanced on behalf of the Union of India that the petitioners are not entitled to any refund as the levy has already been passed on to the consumer." 57. The ground of unjust enrichment as a defence against the claim of restitution was rightly rejected in Maharashtra Vegetable Products Pvt. Ltd. This g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the refund of illegally collected amount can be granted by the Court in exercise of its jurisdiction under Article 226 of the Constitution. 60. In Mahindra and Mahindra Limited v. Union of India and Others reported in 1984 E.L.T. 262 Bombay High Court held that the State is under an obligation to refund monies which have been recovered without authority of law. Merely because the extra duty has been collected from the consumers and refund would result in unjust enrichment of the manufacturer a refund cannot be denied to the petitioners except in exceptional circumstances if the Court strongly considers it unjust to do so. 61. This Court in the case of Union Carbide Co. Ltd. v. Assistant Collector of Central Excise reported in 1978 E.L.T. 180 held that good fiscal administration enjoins that all lawful taxes should be properly collected and taxes which are not due if realised by the State should be refunded. The theory of unjust enrichment therefore cannot be invoked. 62. The Madras High Court in the case of Soft Beverages (Pvt.) Ltd. Madurai v. Union of India and another reported in 1982 E.L.T. 119 held that the refund of duty paid and collected under the mistake of law can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eover, even if the department is held obliged to grant refund only if the application is made within the prescribed period of one year and in no other case, it does not mean that the High Court cannot grant refund in a petition under Article 226 of the constitution. 65. In any even on the facts of this case there cannot be any question of any unjust enrichment of the petitioner. The ground of refund of the amounts collected without any authority of law is only consequential to the order passed by the Appellate Collector on 30th April, 1981 quashing the orders made by the Assistant Collector on 6th October, 1977 and July 11, 1978. It is not a case that excise duty is payable by the manufacturer. It there is a short levy of duty it is the manufacturer who would be liable to pay the same on demand being raised by the Central Excise Authority under Section 11 A of the said Act. In such a case, Central Excise Authority will not consider whether the manufacturer would be entitled to realise the short levied duty subsequently from the customers. According to the Excise Authorities this is not a relevant consideration in demanding short levied duty. By the time such duty is demanded the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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