1980 (10) TMI 65 - HC - Central Excise

Summary

Issues:
Interpretation of compounded levy rules for a cooperative society operating powerlooms under Central Excise Department's guidance.

Analysis:
The petition involves a cooperative society operating powerlooms seeking clarification on the compounded levy applicable to them. The Assistant Collector had initially informed the society that they were entitled to a concessional rate of excise duty, irrespective of the number of looms operated. The society continued to operate 65 powerlooms based on this communication. However, later, a show cause notice was issued demanding a substantial sum from the society, alleging they were not entitled to the concessional rate. The Appellate Collector acknowledged the society's hardship due to lack of timely guidance from the Department but upheld the demand. The Revisional authority confirmed this decision but set aside a part of it for lack of Textile Commissioner's approval. The High Court found that the Department's communication regarding the limitation of looms was not effectively communicated to the society until July 1972. The Court held that penalizing the society for the Department's oversight was unjust. The Court directed the withdrawal of the demand for the period between May 15, 1972, and July 12, 1972, and upheld the relief granted by the Appellate Collector for the subsequent period.

The dispute primarily revolves around the Department's failure to effectively communicate a change in policy to the society, resulting in the society operating in accordance with previous guidance. The Court noted that the society promptly adjusted its operations upon being informed of the new policy in July 1972, dismantling excess looms. The Court emphasized that penalizing the society for the Department's oversight was unwarranted. The Appellate Collector's decision to grant relief for the subsequent period was upheld, emphasizing that the society's entitlement to the concessional rate should not be contingent on administrative approvals unrelated to the actual operation of powerlooms. The Revisional authority's decision to set aside the relief based on administrative approvals was deemed erroneous, and the Appellate Collector's direction was restored.

In conclusion, the High Court allowed the petition, directing the modification of the demand by withdrawing it for the period between May 15, 1972, and July 12, 1972, and following the Appellate Collector's direction for the subsequent period. The Court emphasized that the society should not be penalized for the Department's failure to effectively communicate policy changes and upheld the society's entitlement to the concessional rate based on their actual compliance with operational requirements, not administrative formalities.