1978 (12) TMI 48 - HC - Central Excise

Issues Involved:
1. Excisability of blended yarn prior to the introduction of Item 18E by the Finance Act, 1972.
2. Appropriateness of seeking refund through writ petitions instead of suits.
3. Impact of delay in filing writ petitions on the entitlement to reliefs.

Issue-Wise Detailed Analysis:

1. Excisability of Blended Yarn Prior to the Introduction of Item 18E by the Finance Act, 1972:

The primary question was whether blended yarn was subject to excise duty before the introduction of Item 18E on 16-3-1972. The petitioners argued that the excise duty on blended yarn was imposed for the first time by this new item. They contended that the Revenue's shifting stance-initially classifying blended yarn under Item 18A (cotton yarn) via a trade notice on 10-5-1963, and later under Item 18 (synthetic yarn) through Notification No. 156/64 on 16-10-1964-indicated ambiguity. The petitioners relied on the Gujarat High Court's judgment in Ahmedabad Manufacturing and Calico Ptg. Co. v. Union of India, which held that blended yarn could not be classified under existing items before Item 18E's introduction, making any prior levy ultra vires.

The Revenue countered that the words "all sorts" in Item 18A included blended yarn, thus justifying the excise duty collection based on the 1963 trade notice. They also argued that the 1964 notification reasonably classified blended yarn as synthetic yarn when synthetic content exceeded 60%. They cited the Brussels Trade Nomenclature to support their classification method.

The court did not make a final pronouncement on this issue, indicating that the matter required a detailed factual assessment suitable for a civil trial.

2. Appropriateness of Seeking Refund through Writ Petitions Instead of Suits:

The petitioners filed writ petitions under Article 226 of the Constitution, seeking refunds of excise duty paid under a mistaken belief of law. They argued that the Supreme Court's rulings in Sales-tax Officer v. Mukandlal Saraf and Patel India v. Union of India supported their right to seek refunds via writ petitions. They contended that the mistake of law was realized only after the Gujarat High Court's judgment in 1976.

The Revenue argued that the question involved mixed issues of law and fact, necessitating a trial in civil suits. They also highlighted the delay in filing the writ petitions, suggesting that the petitioners should be denied discretionary relief.

The court agreed with the Revenue, emphasizing that the petitioners should seek relief through civil suits due to the mixed nature of the issues and the delay in filing the writ petitions. The court cited the Supreme Court's decision in State of Madhya Pradesh v. Bhailal Bhai, which discouraged granting mandamus in cases of unreasonable delay.

3. Impact of Delay in Filing Writ Petitions on the Entitlement to Reliefs:

The court noted that the petitioners delayed filing the writ petitions until 1976-1977, despite the relevant trade notice and exemption notification being issued in 1963 and 1964, respectively, and Item 18E being introduced in 1972. The petitioners claimed they discovered the mistake only after the Gujarat High Court's judgment in 1976.

The Revenue argued that the petitioners had multiple opportunities to recognize the alleged mistake, making their delay unreasonable. The court agreed, applying the principle from State of Madhya Pradesh v. Bhailal Bhai, which discourages granting mandamus in cases of unreasonable delay.

The court further noted that even if the petitioners filed suits, the period of pendency of these writ petitions would be excluded from the limitation period under Section 17 of the Limitation Act.

Conclusion:

The court dismissed the writ petitions, directing the petitioners to seek relief through civil suits if so advised. The court emphasized that the delay in filing the writ petitions precluded the granting of extraordinary relief through mandamus. The court also addressed additional submissions by the Revenue, noting that the Supreme Court's ruling in D. Cawasji v. State of Mysore countered the arguments regarding the unjust nature of refunding taxes already expended for the common good.

← Previous Next →