1978 (11) TMI 73 - HC - Central Excise

Short levy - Time bar for recovery of demands - Rough rolled zinc flat forms - Other legal proceedings

Summary

Issues Involved:
1. Whether the rough rolled flat forms of zinc produced by the petitioner are marketable commodities and known as zinc sheets or strips under Item No. 26B(2) of the First Schedule of the Central Excises and Salt Act, 1944.
2. Whether the demand for excise duty is valid despite the rough rolled flat forms of zinc not being removed from the factory premises.
3. Whether the demand for excise duty for the period between March 15, 1969, and February 12, 1973, is barred by limitation.

Issue-wise Detailed Analysis:

1. Marketability and Classification as Zinc Sheets or Strips:
The petitioner argued that the rough rolled flat forms of zinc produced during the manufacturing process of dry cell batteries were not marketable commodities and were not known to the market as zinc sheets or strips, which are covered by Item No. 26B(2) of the First Schedule of the Act. The court noted that there was a significant controversy regarding whether these flat forms could be classified as zinc sheets or strips. The petitioner presented evidence, including affidavits from technical experts, to support their claim. However, the respondents contended that the flat forms, despite some differences from standard specifications, were known as zinc sheets or strips to the trade of dry cell battery manufacturing. The court referred to a letter dated September 19, 1974, from the petitioner to the Superintendent of Central Excise, which indicated that the petitioner acknowledged sending zinc slabs to a rolling mill to get them rolled into zinc sheets for use in the factory. This admission led the court to conclude that the flat forms were known as zinc sheets to the trade, and the demand for excise duty on these flat forms was not contrary to law.

2. Validity of Excise Duty Demand Without Removal from Factory Premises:
The petitioner contended that the demand for excise duty was invalid because the excisable event, i.e., the removal of excisable articles from the factory, never took place. They argued that the flat forms of zinc were immediately put to use within the factory premises for manufacturing dry cell batteries. The court examined the relevant rules and noted that under Rule 9 of the Central Excise Rules, 1944, excisable goods could not be removed from the place of production or manufacture unless the excise duty was paid. The court also referred to Chapter VII-A of the Rules, which deals with self-assessment procedures and has an overriding effect. The court concluded that even though the flat forms did not leave the factory premises, their removal for consumption or further manufacture within the factory constituted a removal under Rule 9. Thus, the excisable event had taken place, and the demand for excise duty was valid.

3. Limitation on Demand for Excise Duty:
The petitioner argued that the demand for excise duty for the period between March 15, 1969, and February 12, 1973, was barred by limitation under Section 40(2) of the Act and Rule 10 of the Rules. The court examined the relevant provisions and noted that Section 40(2) of the Act, as it stood at the relevant time, barred any legal proceedings for anything done under the Act after six months. However, the court concluded that the expression "other legal proceedings" did not include proceedings initiated by departmental authorities for the quantification and realization of duty. The court also noted that Rule 10-A, which does not contain any limitation period, was applicable in this case as there had been no assessment of duty resulting in short levy. Consequently, the demand for excise duty was not barred by limitation.

Conclusion:
The court concluded that the petitioner was not entitled to any relief. The rough rolled flat forms of zinc were covered by Entry 26-B(2) of the First Schedule to the Central Excises and Salt Act, 1944, and the petitioner was liable for payment of duty. The past demands were not barred by limitation. Both writ petitions were dismissed with costs.