1964 (7) TMI 56 - HC - Central Excise

Summary

Issues Involved:

1. Whether the petitioners are manufacturers of cotton fabrics as defined in the Central Excise and Salt Act, 1944.
2. Whether the cotton fabrics in question attract the provisions of Rules 7 and 9 of the Central Excise Rules or enjoy exemption under Rule 8.
3. Whether the petitioner can be considered a manufacturer under Section 2(f) of the Act.
4. Constitutional validity of Section 3 of the Act and Rules 7 and 9.
5. Applicability of Rule 10 regarding the time-barred nature of the demand.

Issue-wise Detailed Analysis:

1. Manufacturer Definition under Central Excise and Salt Act, 1944:

The court examined whether the petitioners could be considered manufacturers under the Central Excise and Salt Act, 1944. The petitioners argued that they were not manufacturers, but the societies were. The court found that the petitioners got the goods manufactured by supplying yarn and paying weaving charges to the societies. The court concluded that the petitioners were indeed manufacturers as they engaged in the production or manufacture of goods intended for sale, even if the actual manufacturing was done by the societies.

2. Applicability of Rules 7 and 9 or Exemption under Rule 8:

The court examined whether the cotton fabrics manufactured by the petitioners attracted the provisions of Rules 7 and 9 or enjoyed exemption under Rule 8. The petitioners argued that the goods were exempt under the notification dated April 30, 1960. The court analyzed the notification and concluded that the exemption applied only to goods produced by the society through its members on looms either owned by the society or its members or allotted to such members. Since the petitioners got the goods manufactured through the societies, the exemption did not apply, and the goods attracted the provisions of Rules 7 and 9.

3. Manufacturer Definition under Section 2(f) of the Act:

The court examined the definition of "manufacturer" under Section 2(f) of the Act. The court held that the definition of "manufacturer" includes anyone who engages in the production or manufacture of goods on their own account if these goods are intended for sale. The court concluded that the petitioners, by engaging the societies to manufacture goods from the raw materials supplied by them and paying only weaving charges, were manufacturers under Section 2(f) of the Act.

4. Constitutional Validity of Section 3 and Rules 7 and 9:

The petitioners challenged the constitutional validity of Section 3 of the Act and Rules 7 and 9, arguing that they imposed unreasonable and excessive restrictions on their right to trade and hold property. The court examined the scheme of the Act and the rules and concluded that the provisions did not impose unreasonable restrictions. The court noted that the Act and rules provided a detailed machinery for assessment, right to raise objections, and right of appeal and revision. The court held that the provisions did not violate Articles 19(1)(f) and (g) of the Constitution.

5. Applicability of Rule 10 Regarding Time-Barred Nature of the Demand:

The petitioners argued that the demand for duty under Rule 9(2) was time-barred under Rule 10. The court held that Rule 10 did not apply to the case as it postulates an assessment resulting in short levy through inadvertence, error, collusion, or misconstruction. The demand in the present case was made under Rule 9(2) for goods removed clandestinely without assessment and payment of duty. Therefore, Rule 10 did not apply, and the demand was not time-barred.

Conclusion:

The court dismissed the petitions, holding that the petitioners were manufacturers under the Act, the goods attracted the provisions of Rules 7 and 9, the provisions of Section 3 and Rules 7 and 9 were constitutionally valid, and the demand was not time-barred under Rule 10.