Neelam Prints Vs. Deputy Supdt., Central Excise and ors. - Court Judgment

I.S. Tiwana, J.

1. The petitioner concern established in the year 1963 is engaged in the business of dyeing and printing of artificial silk fabrics. Admittedly till the issuance of notification dated April 24, 1962 (Annexure P-l) by the respondent authorities in exercise of powers conferred by Rule 8(1) of the Central Excise Rules, 1944, no excise duty was payable by the petitioner concern under the Central Excises and Salt Act, 1944. The contents of the above noted notification are as under :

'MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION

Central Excises

New Delhi, the 24th April, 1962

G.S.R. 531.-In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, as in force in India and as applied to the State of Pondicherry, the Central Government hereby exempts rayon orv artifical silk fabrics falling under Item No. 22 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and specified in column (2) of the Table hereto annexed from so much of the duty as is mentioned in the corresponding entry in column (3) thereof:

TABLE

________________________________________________________________________________

Sr. NO. Description Duty from which exempted

(1) (2) (3)

________________________________________________________________________________

1. Unprocessed fabrics The whole

Processed fabrics 3.5 np per sq.

Metre

_(No. 51/62)

B.N. BANNERJI

JOINT SECY.'

Another notification (Annexure P-3) was issued by the Central Government on March 7, 1964, amending notification Annexure P-l and contents of the same are as follows :-

MINISTRY OF FINANCE

(Department of Revenue)

Central Excises

New Delhi, the 7th March, 1964

G.S.R. 388.-In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby makes the following amendment rin the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 51/62-Central Excise, dated the 24th April, 1962, namely :-

In the said notification the following explanation shall be added, at the end, namely :-

'Explanation.-For the purpose of this Notification the expression 'Processed' means all processes which are ordinarily carried on with the aid of power or of steam excluding the process of calendering with plain rollers.' [No. 64/64-F. 15/2/64-CX II]

N.B. Sanjana,

Under Secy.'

2. The claim of the petitioner is that since it was not manufacturing any rayon or artificial silk fabrics but was only engaged in dyeing and printing rayon and artificial silk fabrics which admittedly they were doing with the help of steam, they were neither liable nor did they pay any excise duty till the issuance of notification Annexure P-3. According to the petitioner, it was for the first time vide Annexure P-3 that the expression 'processed' was defined to include all processes which are ordinarily carried on with the aid of power or steam. Its specific case is that it was not engaged in the processing of rayon or artificial silk fabrics with the aid of power.

3. On March 8, 1964, respondent No. 1, Deputy Superintendent, Central Excise, Amritsar, issued a demand notice to the petitioner concern for payment of Rs. 53,179.28 on account of excise duty for the period February 1963 to March 7, 1964, that is upto the date of issuance of notification Annexure P-3. Against this demand, a representation was made by the petitioner but the same was rejected by the Assistant Collector, respondent No. 2, on August 14, 1969. However, on appeal the case was remanded by the Collector for affording further opportunity to the petitioner. On reconsideration, the Assistant Collector vide his order Annexure P-4 dated April 26, 1972 rejected the contention of the petitioner to the effect that since it was not engaged in processing of rayon or artificial silk fabrics with the aid of power and were doing it only with the aid of steam, it was not liable to pay the excise duty prior to the issuance of Annexure P-3. This order of the Assistant Collector has been .affirmed by the revision vide their orders Annexures P-5 and P-6. The petitioner now impugns the above noted orders and the demand notice on the grounds :-

(i) that it is not liable to pay excise duty prior to the issuance of Annexure P-3 as it was not engaged in processing of rayon and artificial silk fabrics with the aid of power and was rather doing it solely with the aid of steam,

(ii) that the action of the respondents in singling out the petitioner for such a demand and liability is discriminatory, and

(iii) that the claim of the respondent authorities is barred by time in view of the provisions of Rule 10 of the Central Excise Rules.

4. The stand of the respondent authorities is that though notification, Annexure P-3, purports to have been issued by way of an amendment of notification Annexure P-l, yet the former is only a clarification of the later and the case of the petitioner is governed by Rule 10(a) of the Central Excise Rules so far as the question of limitation is concerned. It is also explained in reply to the assertions made by the petitioner in paragraph 13 of the petition disclosing differential or discriminatory treatment meted out to it that the cases referred to by the petitioner were entirely on different facts and were not similar to those of the petitioner.

5. After hearing the learned counsel for the parties at some length, I do not find any merit in the stand taken by the respondents so far as the first contention of the petitioner is concerned. This is more so in the light of the meaningful admission made by the respondent authorities in paragraph 7 of their written statement in reply to the claim put forth by the petitioner in the corresponding paragraph of the petition. This is what has been stated in paragraph 7 of the petition :-

'That the Excise Department as from 24-4-1962 imposed duty at the figure mentioned in Annexure 'P-l' only on those processed rayon and silk fabrics which processes had been done by the aid of power, and the goods which had either been dyed, or printed without the aid of power were not considered to be processed fabrics and the process of calendering including felt-calendering, singeing padding, back filling (application of the starch to the one side of the fabric) and cropping (cutting away of loss ends from the fabrics) were not considered as processing for the purposes of assessment of excise duty on rayon and art silk fabrics. This was the consideration not only in the Excise Collectorate at Amritsar, but also throughout the entire Indian Union, copy of a trade notice issued by the Central Excise Collectorate, Baroda, is annexed hereto as Annexure 'P-2'.'

Reply to it is 'admitted'.

6. In the light of these pleadings it is abundantly established that the Excise authorities throughout the Indian Union understood the contents of Annexure P-l to be that excise duty is leviable to the extent mentioned therein only on those rayon and artificial silk fabrics which were processed with the aid of power or goods which had either been dyed or printed without the aid of power or with steam, were not considered to be processed fabrics. It was this situation which necessitated the issuance of Annexure P-3 thereby to include within the scope of 'processed fabrics', rayon and artificial silk fabrics which han been dyed or printed with the aid of steam. If that were not so, then the issuance of Annexure P-3 is totally meaningless. The submission of Mr. Brar, learned counsel for the respondent authorities that this notification is only by way of an explanation or clarification, carries no conviction for the reasons, firstly, that the notification itself reads that it is by way of amendment of the earlier notification, Annexure P-l dated April 24, 1962, and secondly, that it has been issued in exercise of the powers vested in the Government under Sub-rule (1) of Rule 8 which rule vests the Central Government with the power to exempt any excisable goods from the duty leviable on such goods wholly or partially. Undoubtedly the Central Government was competent to issue this notification and no challenge to its validity can be launched on that account. But this notification cannot operate retrospectively bringing within the scope of Annexure P-l, the goods which were otherwise not excisable. For the proposition that a notification like Annexure P-3 can have no retrospective operation, a reference to the authoritative pronouncement of their Lordships of the Supreme Court in The Cannanora Spinning and Weaving Mills Ltd. v. The Collector of Customs and Central Excise, Cochin and Ors., A.I.R. 1970 S.C. 1950, can be made with advantage. In that case too a similar explanation was sought to be added to an earlier notification issued in exercise of the powers under Rule 8 of the above noted rules and it was held by the Supreme Court that the same could not have any retrospective effect for operation. In fact in that case the learned counsel for the department did not even support the demand raised by the revenue on the basis of that impugned notification adding the explanation to the earlier notification. To my mind, the ratio of this judgment clearly covers the merits of the instant case. For the above noted reason alone the demand raised by the respondents cannot possibly be sustained and in view of this conclusion of mine I need not go into the merits of the remaining contentions raised by the petitioner's counsel.

7. In the light of the discussion above, this petition succeeds and the impugned demand raised by the respondent authorities is hereby annulled. I, however, pass no order as to costs.