Full Judgment Text
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PETITIONER:
AHMEDABAD MANUFACTURING AND CALICOPRINTING CO. LTD. AND A
Vs.
RESPONDENT:
UNION OF INDIA AND ORS.
DATE OF JUDGMENT12/01/1993
BENCH:
YOGESHWAR DAYAL (J)
BENCH:
YOGESHWAR DAYAL (J)
VERMA, JAGDISH SARAN (J)
VENKATACHALA N. (J)
CITATION:
1993 SCR (1) 142 1993 SCC Supl. (2) 7
JT 1993 (1) 85 1993 SCALE (1)63
ACT:
Central Excises and Salt Act, 1944/Central Excise Rules,
1944: Schedule I--Tariff Items 18.I, 18 III and 18E/Rules 9
and 49--Notification dated 20.2.1982 amending the Rules
retrospectively--Yarn sized for purpose of weaving the same
into fabrics--Levy of duty on the weight of sized
yarn--Validity of.
HEADNOTE:
The petitioners challenged before the High Court the levy of
excise duty on the weight of the yarn sized for the purpose
of weaving them into fabrics. The High Court held that no
duty could be levied on the weight of the sizing material
contained in yarn, and directed that the duty should be
refunded since it has been levied not on the basis of yarn
at the spindle stage, but on the weight of the sized yarn.
After the said judgment, the Central Government by
Notification dated 20.2.1982 amended Rules 9 and 49 of the
Central Excises and Salt Act, 1944 and Section 51 of the
Finance Act, 1982 with retrospective effect. In accordance
with the said Notification, Central Excise Department issued
show cause notices to the petitioners. The constitutional
validity of these amendments are challenged by the
petitioners in the present Writ Petitions filed before this
Court.
On behalf of the petitioners, it was contended that their
cases were covered by the decision of this Court in J.K.
Cotton Spinning and Weaving Mills Ltd. & Anr. v. Union of
India and Ors., [1988] 1 SCR 700 and that excise duty could
be levied on the weight of the unsized yarn and not on the
basis of the weight of the sized yarn.
Allowing the petitions, this Court
HELD: 1.1. The Vires of Rules 9 and 49 of the Central
Excise Rules, 1944 as well as section 51 of the Finance Act,
1982 and the retrospective
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application of the same has already been upheld by this
Court. [145E]
1.2. The sized yam which is actually put into the integrated
process will not again be subjected to payment of excise
duty, for the unsized yam which is sized for the purpose,
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does not change the nature of commodity as yarn. Thus
excise duty cannot be levied on the weight of the yarn after
the yarn is sized for the purpose of weaving the same into
fabrics. [145G]
13. Practically nine years have gone by since the show
cause notices were issued by virtue of the same directives
which were subject matter of J.K Cotton Mills case. In view
of this peculiar fact it would not be in the interest of
justice if the petitioners are directed to contest the
individual show cause notices issued by the respondents. In
order to avoid multiplicity of proceedings involving time
and expense, the show-cause notices in all these cases are
quashed. [148F-G]
J.K Cotton Spinning and Weaving Mills Ltd & Anr. v. Union of
India & Ors., [1988] 1 S.C.R. 700, applied.
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition (Civil) No. 3 of 1983.
(Under Article 32 of the Constitution of India).
WITH
W.P. Nos. 4OO-402, 425, 492, 2493-2495, 2526-2528 of 1983
and 1256 of 1987.
Soli J. Sorabjee, Ravinder Narain, DA. Dave and P.H.
Parekh, for the Petitioners.
A.K. Ganguli, T.V.S.N. Chari Ms. Radha Rangaswamy and P.
Parmeshwaran for the Respondents.
The Judgment of the Court was delivered by
YOGESHWAR DAYAL J. This order will dispose of the aforesaid
writ petitions under Article 32 of the Constitution of
India. All these cases come under Item 18.1 and/or 18 III
and/or 18E of the Tariff contained in the schedule attached
to the Central Excise and Salt Act 1944 (hereinafter
referred to as ’the Act’). For facility of reference we are
giving the facts of the case of Civil Writ Petition No. 3 of
1983.
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This Writ Petition is stated to be covered by the decision
of this Court in J.K Cotton Spinning and Weaving Mills Ltd.
& another v. Union of India and others, [1988] 1 S.C.R. 700
and the surviving prayer in the writ petition is to declare
that the duty of excise in respect of Tariff Item Nos. 18
(A) (a), 18 (III) (ii) and 18E is to be levied and collected
on the weight of the unsized yarn and not on the basis of
the weight of the sized yarn".
Before we deal with the objections of the learned counsel
for the respondents, it would be useful to examine the
points which were involved in the aforesaid case of J.K
Cotton Mills. The appellants in the said case had a
composite mill wherein it manufactured fabrics of different
types. In order to manufacture the said fabrics, yarn was
obtained at an intermediate stage. The yarn so obtained was
further processed in an integrated process in the said
composite mill for weaving the same into fabrics. The
appellants did not dispute that the different kinds of
fabrics which were manufactured in the miff were liable to
payment of excise duty on their removal from the factory.
They also did not dispute their liability in respect of yarn
which was also removed from the factory. It was the
contention of the appellants therein that no duty of excise
could be levied and collected in respect of yam which was
obtained at an intermediate stage and, thereafter subjected
to an integrated process for the manufacture of different
fabrics. On a writ petition, by those appellants, the Delhi
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High Court by its judgment dated 16th October, 1980 held
that yarn obtained and further processed within the factory
for the manufacture of fabrics could not be subjected to
duty of excise. It was the case of the appellants that in
spite of the said decision of the Delhi High Court, the
Central Board of Excise had wrongly issued a circular dated
24th September, 1980 purporting to interpret Rules 9 and 49
of the Central Excise Rules, 1944 (hereinafter referred to
as the Rules’) and directing the subordinate excise
authorities to levy and collect duty of excise in accordance
therewith. In the said circular, the Board had directed the
subordinate excise authorities that use of goods in
manufacture of another commodity even within the
place/premises that have been specified in this behalf by
the Central Excise Officers in terms of the powers conferred
under Rule 9 of the Rules, will attract duty". As the said
circular was being implemented to the prejudice of the
appellants, they filed the writ petition before the Delhi
High Court, inter alia, challenging the validity of the said
circular.
During the pendency of the writ petition in the Delhi High
Court, the
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Central Government by Notification No. 20/82-C.E. dated 20th
February, 1982 amended Rules 9 and 49 of the Rules. Section
51 of the Finance Act provides that the amendments in Rules
9 and 49 of the Rules shall be deemed to have, and to have
always had the effect on and from the date on which the
Rules came into force i.e. 28th February, 1944. After the
said amendments of the Rules with retrospective effect, the
appellants amended the Writ petition and challenged the
constitutional validity of Section 51 of the Finance Act,
1982 and of the amendments to Rules 9 and 49 of the Rules.
The High Court came to the conclusion that section 51 of the
Finance Act, 1982 and Rules 9 and 49 of the Rules, as
amended, were valid. It was further held that the
retrospective effect given by Section 51 of the Finance Act,
1982 will be subject to the provisions of Sections 11A and
11B of the Act. It was further held that the yam which is
produced at an intermediate stage in the mill of the
appellants therein and subjected to the integrated process
of weaving the same into fabrics, will be liable to payment
of excise duty in view of the amended provisions of Rules 9
and 49 of the Rules. But the sized yam which is actually
put into the integrated process will not again be subjected
to payment of excise duty for, the unsized yarn, which is
sized for the purpose, does not change the nature of the
commodity as yarn. The Writ Petition was accordingly
allowed in part, as stated aforesaid, and it was this
decision which came up in appeal before this Court. This
Court agreed with the Delhi High Court and upheld the vires
of Rules 9 and 49 of the Rules as well as Section 51 of the
Finance Act, 1982. This Court also agreed with the High
Court that the retrospective effect given by section 51 of
the Finance Act, 1982 will be subject to the Provisions of
Sections 11A and 11B of the Act. This Court also agreed
with the view of the High Court that the yarn which is
produced at an intermediate stage in the mill of the
appellants and subjected to integrated process of weaving
the same into fabrics, would be liable to payment of excise
duty in view of the amended provisions of the Rules, But,
this Court further agreed with the High Court, the sized
yarn which is actually put into the integrated process will
not again be subjected to payment of excise duty for, the
unsized yarn, which is sized for the purpose does not change
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the nature of the commodity as yarn. This Court observed at
pages 720 and 721 of the report as under:-
"In the instant case, the appellants are
liable to pay excise duty on the yarn which is
obtained at an intermediate stage and,
thereafter, further processed in an integrated
process for weav-
146
ing the same into fabrics. Although it has
been alleged that the yam is obtained at an
intermediate stage of an integrated process of
manufacture of fabrics, it appears to be not
so. After the yarn is produced it is sized
and, thereafter, subjected to a process of
weaving the same into fabrics. Be that as it
may, as we have held that the commodity which
is obtained at an intermediate stage of an
integrated process of manufacture of another
commodity, is liable to the payment of excise
duty, the yarn that is produced by the
appellants is also liable to payment of excise
duty. In our view, the High Court by the
impugned judgment has rightly held that the
appellants are not liable to pay any excise
duty on the yarn after it is sized for the
purpose of weaving the same into fabrics. No
distinction can be made between unsized yarn
and sized yarn, for the unsized yarn when
converted into sized yarn does not lose its
character as yarn."
The petitioner herein on the other hand approached the
Gujarat High Court and the Gujarat High Court by its
judgment dated 30th July, 1981 had, before the issuance of
the impugned circular dated 24th May, 1982, taken the view
that no duty can be levied on the weight of sizing material
contained in yarn, falling under Tariff Item no. 18-111 or
18-E and directed that the duty levied should be refunded
because the duty has been levied not on the basis of yam at
the spindle stage, but on the weight of the sized yarn.
After the decision of the Gujarat High Court the Central
Government had amended Rules 9 and 49 of the Rules and
Section 51 of the Finance Act, 1982, had made them effective
retrospectively.
The present writ petition filled in this Court had inter
alia pleaded that the retrospective amendment of Rules 9 and
49 of the Rules as well as Section 51 of the Finance Act,
1982 be declared as ultra vires of the Constitution. This
Court upheld the validity of the Section as well as the
retrospective applicability of the Rules but took the view
that this would be subjected to the provisions of Sections
11A and 11B of the Act and at the same time declared that
the appellants were not liable to pay excise duty on the
yarn after it is sized for a purpose of weaving the same
into fabrics.
It will be noticed that under items 18.1, 18.III and 18E the
measure is "per kilogram". At this stage items 18.1, 18.111
and 18E of the Tariff may be noticed
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"18. I. Man-made fibres, other than mineral fibres :
(i) Non-cellulosic
Eighty-five rupees per kilogram
(ii) Cellulosic
Ten rupees per kilogram
’18.III. Cellulosic spun yarn:
Yam, in which man-made fibre of cellulosic origin predomi-
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nates in weight and, in or in relation to the manufacture of
which any process is ordinarily carried on with the aid of
power
(i) not containing, any manmade fibres of non-cellulosic
origin.
six paise per count per kilogram
(ii) containing man-made fibres of non-cellulosic origin.
Eighteen Rupees per kilogram. Explanation 1: "Count" means
the size of grey yarn (excluding any sizing material)
expressed in English Count.
Eighteen Rupees per kilogram
"18E. Non-cellulosic Spun Yam: Spun (discontinuous) yarn,
in which man-made fibres of noncellulosic origin, other than
acrylic fibre, predominate in weight and, in or in relation
to the manufacture of which any process is ordinarily
carried on with the aid of power.
Twenty-four rupees per kilogram.
148
Explanation : Explanation III under sub-item III of item No.
18 shall, so far as may be, apply in relation to this item
as it applies in relation to that item."
It will be noticed from the aforesaid items that the measure
for imposition of excise duty is by weight "per kilogram" in
all the three items, namely-18.1, 18.111 and 18E.
Therefore, the aforesaid decision in J.K. Couon Mills will
be applicable to all types of cases under Items 18.1, 18.111
and 18E. After the decision of the Gujarat High Court,
instead of granting the refund, the Superintendent of
Central Excise, Range IV, Division V, Ahmedabad, issued
impugned notices, collectively annexed as Annexures ’B’ and
’C’ to the present writ petition in pursuance of the
directives dated 24th May, 1982 which are subject matter of
challenge in the present writ petition.
On behalf of the respondents Mr. Ganguly learned counsel
submitted that this Hon’ble Court ought not to entertain the
present writ petition under Article 32 of the Constitution.
He, however, could not dispute that the matter is directly
covered by the decision of this Court in the aforesaid case
of J.K Cotton Mills.
These petitions were admitted to hearing in view of the
pendency of the aforesaid appeal in the case of J.K Cotton
Mills and in view of the decision of the Delhi High Court
which was appealed against in the aforesaid case of J.K
Couon Mills. Practically nine years have gone by now and
the impugned show cause notices have been issued by virtue
of the same directives which were subject matter of the
aforesaid case of J.K.cotton Mills. In view of this
peculiar fact it would not be in the interest of justice if
the parties are directed to contest the individual show
cause notices issued by the respondents in view of the
aforesaid directives. In order to avoid multiplicity of
proceedings involving time and expense, we quash the
impugned notices in all the cases.
The result is that all the aforesaid writ petitions are
accepted and the impugned show cause notices are quashed.
There will be no order as to costs.
G.N. Petitions allowed.
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