TMI Blog1987 (12) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... was earlier manufactured by them in the spinning department and which was captively consumed by them for manufacturing the end-product viz. fabric, in the assessable value of the manufactured final product i.e. the fabric. As they had not done so, they were liable to pay difference in duty which would have been paid on the final product if the excise duty on manufactured yarn was included, and the duty which they actually paid on the fabric, by not including this excise duty. Accordingly show cause notices were issued to the concerned mill companies under the then prevailing Rules 10 and 10A of the rules and in most of the cases the dispute was adjudicated upon. In some cases, the petitioners carried the matters in appeal, but the appeals failed. Under these circumstances, some of the petitioners have challenged the final adjudication order and appellate orders while some of them have challenged such show cause notices under Rules 10 and 10A before adjudication and have straight come to this court at notice stage itself. The issuance of these notices was challenged on diverse grounds which will be indicated hereinafter. Before we do so, it will be necessary and appropriate to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of this section, - (d) "Value" in relation to any excisable goods, - (i) where the goods are delivered at the time of removal in a packed condition, includes the cost of such packing except the cost of the packing which is of a durable nature and is returnable by the buyer to the assessee. Explanation - In this sub-clause "packing" means the wrapper, container, bobbin, pirn, spool, reel or warp beam or any other thing in which or on which the excisable goods are wrapped, contained or wound : (ii) does not include the amount of the duty of excise, sale tax and other taxes, if any payable on such goods and, subject to such rules as may be made, the trade discount (such discount not being refundable on any account whatsoever) allowed in accordance with the normal practice of the wholesale trade at the time of removal in respect of such goods sold or contracted for sale; 3. Section 6 reads as under :- Sec. 6: Certain operations to be subject to licence - The Central Government may, by notification in the Official Gazette, provide that, from such date as may be specified in the notification, no person shall except under the authority and in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners in their spinning department and the fabric which they ultimately manufacture in the weaving department by captively consuming the yarn are liable to excise duties. It also becomes obvious that the moment yarn is manufactured on the spindles it is liable to excise duty. As per Items 18 and 18A these petitioners mill companies had to pay separate excise duty on yarn and if the yarn was captively consumed, they had, ultimately, to pay the requisite excise duty on the final product viz. fabric also. 6. Now it is necessary to note the exact scope and ambit of the then existing Rules 96V and W around which the controversy in the present cases turns. The relevant portion of Rule 96V provided that "where a manufacturer who manufactures cotton yarn......and ....... uses the whole or part of the yarn manufactured by him in the manufacture of cotton fabric in his own factory, makes in the proper form an application to the Collector in this behalf, the special provisions contained in this section, on such application being granted by the Collector apply to such manufacturer in substitution of the provisions contained elsewhere". Rule 96W provided that "having regard to the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discription or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account-current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice. (2) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty or charges due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow. 10A. Residuary powers for recovery of sums due to Government. - (1) Where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases referred to above, have effect as if for the words "six months", the words "five years" were substituted. Explanation. - Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the period of six months, or five years, as the case may be. (2) The Assistant Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served, under sub-rule (1), determine the amount of duty due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. For the purpose of this rule - (i) 'refund' includes rebate referred to in Rules 12 and 12A (ii) 'relevant date' means - (a) in the case of excisable goods on which duty has not been levied or paid or on which duty has been short-levied or has not been paid in full, the date on which the duty was required to be paid under these rules; (b) in the case of excisable goods on which the value or the rate of duty has been provisionally determined under these rules, the date on which the duty is adjusted after final determination of the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Act a monthly return, showing particulars of the duty paid on the excisable goods removed during the month to which the said return relates, is to be filed by a manufacturer or producer or a licensee or a warehouse, as the case may be, the date on which such return is so filed; (b) where no monthly return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the duty is to be paid under this Act or the rules made thereunder; (b) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder; the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded the date of such refund it is in the background of the aforesaid statutory settings that we have to consider the various points canvassed by the learned counsel for the petitioners. Points Canvassed :- 8. Mr. S.I. Nanavati, learned counsel appearing for some of the petitioners raised the following contensions: (i) Stand of the department in the show cause notices issued to the concerned petitioners t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued under old Rule 10 were patently illegal and ultra vires. (v) In any case the Assistant Collector has no jurisdiction to review the orders passed by the appropriate officers approving the price lists under relevant rules. Consequently, the orders of adjudications passed by the authority going behind the approved price lists were patently erroneous and without jurisdiction. And on that basis also the impugned orders of adjudication are liable to be quashed. Mr. K.S. Nanavati and Mr. A.C. Gandhi broadly supported the contentions canvassed by Mr. S.I. Nanavati. Mrs. K.A. Mehta, Standing Counsel for the Union of India and the Excise Department refuted these contentions and submitted that these petitions are liable to be dismissed. Pointwise discussions :- 9. (1) So far as the question of property assessing the value of the fabric manufactured by the petitioners is concerned, it is obvious that fabric manufactured by the petitioners in their composite mills is a separate excisable product. Duty thereon has to be paid according to the provisions of the Act. It is now well settled by a series of decisions of Supreme Court and High Courts that assessable value for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, the excise duty paid on yarn used to be included in the manufacturing costs of fabric for years together by these very composite textile mills. However, from 16-3-1976 onwards they had second thoughts and they did not include the excise duty on yarn while preparing the price lists for fabrics and they relied upon Rules 96V and W in that connection. In our view the reliance placed on these rules by the petitioners for that purpose is totally besides the point. Under these rules as they then existed, a concession was given to the concerned petitioners to pay duty on captively consumed yarn at a later date. These rules offered a scheme deferred payment of excise duty on yarn captively consumed by the concerned assessee. These composite mills were utilising the procedure laid down by these rules and got the concession of paying the duty on cotton yarn as well as cotton fabrics together at the time they paid the excise duty on fabrics. However, it is difficult to appreciate how these rules can enable the petitioners to exclude the duty paid by them on yarn captively consumed in manufacturing of fabric while computing the assessable value of fabric. Rules 96V and W merely provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to be taxed under Section 4 of the Act, to say the least all the manufacturing costs incurred by the manufacturer till the manufactured article emerges are of necessity to be included in its assessable value. Therefore, costs of inputs including the excise duty paid on such inputs by the manufacturer as purchaser of inputs from the outside market or as a captive consumer of such inputs manufactured by himself would enter into the manufacturing costs of the final finished product manufactured out of these inputs. Consequently, merely because the authorities permitted the petitioners to pay the excise duty on manufactured yarn at a later stage by way of a deferred system of payment as envisaged by Rules 96V and W, it cannot be said that the liability to pay excise duty on yarn arose for the first time when the duty was actually paid under the aforesaid concessional procedure. On the contrary it must be held that liability to pay excise duty on manufactured yarn arose the moment the manufacturing of yarn was completed at spindle stage. It is that accrued liability to pay excise duty on yarn that was deferred by the concessional procedure permitted under Rules 96V and W. But once un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodity it attracts excise duty on its own under an altogether different tariff item. Thus it is not as if the yarn is being taxed twice over, nor is fabric being taxed twice over. Both are separate manufactured items being taxed separately under different tariff items. In such a case, there would never arise the question of paying duty on duty. In this connection it is profitable to look at the decision of the Supreme Court in the case of Empire Industries Ltd. Others v. Union of India and Others 1985 (20) E.LT. 179 (S.C.). In that case Supreme Court was concerned with the question whether manufactured grey fabric is said to have resulted into a new manufactured coloured fabrics after it was processed. This court had taken the view that when manufactured grey fabric was processed only it did not ceased to be a fabric and consequently processed fabric was not a new manufactured article. Upsetting the aforesaid view of this court, the Supreme Court in the aforesaid decision held that the process of bleaching, mercerising, dyeing, printing, water-proofing would result in a new manufactured product subject to excise duty. Thus as per the aforesaid decision grey fabric, because of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded in the notification issued by the Central Government which omitted the Rule (ii) or even in the absence of such express saving clause, Section 6 of the General Clauses Act could be pressed in service by the respondent authorities. It is not in dispute that there is no express saving clause in the notification whereby Rule 10 came to be omitted on 17-11-1980. So far as the second eventuality is concerned, even that cannot be pressed in service by the respondents for the simple reason that as held by the Constitution Bench of the Supreme Court in the case of M/s. Rayala Corporation P. Ltd. and Another v. The Director of Enforcement, A.I.R. 1970 Supreme Court 494, Section 6 of the General Clauses Act cannot apply to omissions of rules, that it can apply to repeal of statutory enactments of regulations but not to rules especially when they are omitted. In view of this pronouncement of the Supreme Court on the scope of Section 6 it has to be held that, the omission of Rule 10 from the rules would not attract Section 6 of the General Clauses Act and the same cannot apply to save the pending proceedings initiated earlier under the omitted rule. In this connection it is profitable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Interpretation Act of England, which provides that a repeal, unless contrary intention appears does not affect the previous operation of the repealed enactment as if the repeating Act had not been passed and therefore, one cannot subscribe to be broad proposition that Section 6 of the General Clauses Act is ruled out when there is repeal of an enactment followed by fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of this Section. Such incompatibility would have to be ascertained from a consideration of all the provisions of the new law. In that case before the Delhi High Court new Rule 10 was substituted for the earlier Rules 10 and 10A on 6th August, 1977. The question was whether the proceedings initiated under old Rule 10 which was omitted would survive after the enactment of new Rule 10 with effect from 6-8-1977. Answering the question in the affirmative, the Delhi Htgh Court held that the new Rule 10 did not show any different intention from what was discernible from the old rules prior to their substitution. In new Rule 10 for certain types of recoveries limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court held that after the rule is omitted, there would not arise any occasion to file a complaint for the alleged infraction of the rule and that the saving clause in that case only saved things done or omitted to be done under that rule and hence it could not include future filing of complaint. Mrs. Mehta submitted that in the present case such is not the situation. Here Rule 10 has been re-enacted in a statutory form by way of Section 11A which is in pari materia. On the very day the rule was omitted, Section 11A was introduced in the Act. Of course Mrs. Mehta fairly stated that there is no express saving clause in the notification amending rule but she submitted that general principles underlying Section 6 of the General Clauses Act can be effectively pressed in service in such cases. And that there is no such distinction between omission of a provision and its repeal, as much as if the provision is omitted by the present legislature it can be said to be repealed but if it is deleted by delegated legislative functionary it can be said to be an omission and therefore. Section 6 of the General Clauses Act can include "omissions" within the phraseology "repeal" used in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacturing the fabric. In these lists while computing the assessble value of fabric they had not included the excise duty paid by them on yarn. That had resulted into short levying of duty on fabric manufactured by the petitioners. In such an eventuality Rule 10 which existed before 6th August, 1977 was squarely attracted. Rule 10A which is a residuary rule could not obviously apply when Rule 10 directly applied. Similarly, so far as the new Rule 10 brought in statutory book on 6th August, 1977 was concerned, the first part thereof clearly applied to the facts of the case and none of the sub-paras of the proviso applied. The concerned show cause notice had, therefore, to be issued covering the permissible period as laid down by old Rule 10 up to 6-8-1977 or new Rule 10 after 6-8-1977 as the case may be. Reliance is rightly placed by Mr. Nanavati, learned counsel for the petitioners on the very same decision of the Bombay High Court, 1986 (25) E.L.T. 24 (Bom.) in the case of Kamala Mills Ltd. v. Union of India and Others. In that decision learned single Judge Smt. Sujatha V. Manohar, J. has observed as under : "Under Rule 10 read with Rule 173(J) as it was in force at the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court in the case of Amit Processors Pvt. Ltd. (supra) that the adjudication must be avoided on the ground that when Rule 10 was omitted from 6-8-1977 no saving clause was engrafted in the notification deleting the rule, for saving the pending proceedings and as Section 6 of the General Clauses Act could not be pressed in service by the authorities as the Constitution Bench of the Supreme Court had already held that Section 6 of the General Clauses Act will not apply to the omission of rules. It was, therefore, contended by Mr. Mehta that the ratio of the Division Bench decision of this court in the case of Amit Processors Pvt. Ltd. (supra) directly applies to the facts of the cases represented by him. It seems there is substance in the aforesaid contention of Mr. Mehta. The ratio of the decision of the Division Bench of this court to the effect that when Rule 10 was omitted and Section 11A was engrafted on the statute book on the same day, the pending proceedings under the omitted Rule 10 did not survive and Section 6 of the General Clauses Act did not help to salvage the situation for the department. On the same reasoning it must be held that when old Rules 10 and 10A wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mehta has to be rejected as a logical corrollary thereof. 19. Mrs. Mehta for the Union of India then submitted that so far as omission of Rule 10 was concerned, it was specifically done by the rule making authority and Section 11A was added of course on the same day by another authority, viz. the Parliament; while so far as old Rules 10 and Rule 10A were concerned, by the very same Notification No. 267 of 1977, dated 6-8-1977, old Rules 10 and 10A were substituted by Rule 10. She invited our attention to Rule 4 of the said notification which reads as under :- "4. For Rules 10,10A and 11 of the said rules, the following rules shall be substituted namely:- * * * * * She, therefore, contended that it is not a case of omission of Rules 10 and 10A and the enactment of new Rule 10, but it is a case of substitution. It is difficult for us to appreciate this contention. It is not as if that Rules 10 and 10A did not survive even for a moment after Rule 10 got substituted in their place. Moment Rule 10 is substituted, it necessarily means that old Rules 10 and 10A got displaced. Therefore, they stand omitted forthwith after such substitution. Consequently, the distinction tried to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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