1978 (9) TMI 64 - HC - Central Excise

Job work - Nylon and nylon yarn converted into warpsheet - Dutiability - Writ Jurisdiction - Disputed questions of facts

Issues Involved:
1. Whether nylon and rayon warp sheets produced by the petitioner company are excisable items.
2. Whether the processes involved in making warp sheets constitute manufacturing.
3. Whether the petitioner company is entitled to exemption under the notification dated 30th April 1975.
4. Maintainability of the writ application in light of alternative remedies.

Detailed Analysis:

1. Excisability of Nylon and Rayon Warp Sheets:

The petitioner company argued that the nylon and rayon warp sheets are not excisable items as they are merely yarns arranged in a particular manner, not a new commodity. The petitioner contended that the warp sheets consist of 99.4% nylon and 0.6% cotton, and no manufacturing process is involved in making them. The petitioner cited a letter from the Inspector of Central Excise to Madura Mills Company Limited, which treated similar warp sheets as yarns and not excisable items.

2. Manufacturing Process:

The petitioner contended that the process of arranging nylon or rayon yarns with cotton wefts does not constitute manufacturing. They referenced several Supreme Court decisions, including Central Provinces Manganese Ore Company Ltd. v. State of Maharashtra and Allenbury Engineers Pvt. Limited v. Ram Krishna Dalmia, to argue that no new product with a distinctive name, character, or use emerges from the process. The petitioner also cited the case of Lt. Governor, Delhi v. M/s. Ganesh Flour Mills, which held that cutting and moulding tin sheets into containers did not change the original product.

3. Exemption under Notification Dated 30th April 1975:

The petitioner claimed that even if the warp sheets were considered a different product, they were entitled to exemption under the notification dated 30th April 1975, which exempts job work from excise duty. The petitioner argued that they only charged for the job work done on the nylon or rayon yarns supplied by customers and did not charge for the cotton wefts used. The petitioner further contended that the cotton wefts were supplied by another unit of the petitioner company on behalf of the customers.

4. Maintainability of the Writ Application:

The respondents argued that the writ application was not maintainable due to the availability of an alternative remedy under the Excise Act. They contended that the petitioner had preferred an appeal before the Central Board of Revenue and should not be allowed to move the writ court without exhausting this remedy. The respondents also argued that the case involved technical questions that required expert opinion, making it unsuitable for adjudication in a writ proceeding.

In response, the petitioner argued that the writ application was maintainable due to the inherent lack of jurisdiction of the Excise authorities to impose excise duty on the warp sheets. The petitioner also contended that the relief sought in the writ application was comprehensive and could not be obtained through the alternative remedy. The petitioner cited the case of Raja Jadambika Pratap Narayan Singh v. The Central Board of Direct Taxes to argue that the writ court should intervene to prevent continuous suffering due to unjust levy.

Judgment:

The court held that the writ application was maintainable as the relief sought was comprehensive and could not be obtained through the alternative remedy. The court found no serious disputed questions of fact that required expert opinion, as the processes involved in making the warp sheets were admitted by the respondents.

The court concluded that the nylon and rayon warp sheets were not new products but remained yarns, and thus, were not excisable under Item 68 of the First Schedule. The court also held that the petitioner was entitled to exemption under the notification dated 30th April 1975, as the job work criteria were fulfilled.

Order:

The writ application was allowed, and the interim orders were vacated. The petitioner was entitled to withdraw the deposits made under the interim order. The operation of the judgment was stayed till one week after the re-opening of the court after the long Puja Vacation to enable the respondents to prefer an appeal.

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