1982 (11) TMI 51 - HC - Central Excise

Excise duty not payable till goods become marketable - Cotton fabrics - Revisionary order not appealed against

Issues Involved:
1. Classification of the excise duty tariff item applicable to the petitioner's manufactured goods.
2. Validity of the Central Government's order dated 23rd January, 1978.
3. Validity of the Assistant Collector's order dated 3rd November, 1979.
4. Alleged discrimination in the levy of excise duty.
5. Timeliness of the petitioner's challenge against the Central Government's order.

Detailed Analysis:

1. Classification of the Excise Duty Tariff Item:
The primary issue was whether the flocked materials produced by the petitioner should be classified under Tariff Item No. 19-I or Tariff Item No. 19-III of the Central Excise Tariff. The petitioner argued that the goods should be classified under Item No. 19-I, which pertains to "Cotton fabrics other than (i) embroidered in the piece, in strips or in motifs and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials." The Central Excise authorities, however, contended that the goods fell under Item No. 19-III, which covers "Cotton fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials."

2. Validity of the Central Government's Order Dated 23rd January, 1978:
The Central Government's order dated 23rd January, 1978, held that the base fabric before flocking is coated with acrylic emulsions, which is an artificial plastic material. Therefore, the fabric became dutiable under Item No. 19-III at that stage. The court found this order unsustainable because the fabric coated with acrylic emulsions for the purpose of attaching flocks is not marketable per se, and the coating process is incidental to the subsequent flocking. The court emphasized that excise duty is payable only on the manufacture of goods that are per se marketable.

3. Validity of the Assistant Collector's Order Dated 3rd November, 1979:
The Assistant Collector's order dated 3rd November, 1979, reversed an earlier classification and directed that the petitioner's goods be classified under Tariff Item No. 19-III. The court quashed this order, noting that it was based on the Central Government's order dated 23rd January, 1978, which had already been deemed unsustainable. The court also pointed out that the Assistant Collector had no power to review his earlier quasi-judicial order dated 9th May, 1979, which classified the goods under Item No. 19-I.

4. Alleged Discrimination in the Levy of Excise Duty:
The petitioner contended that while other manufacturers of similar goods were being subjected to duty under Tariff Item No. 19-I, the petitioner was being discriminated against by being made to pay duty under Item No. 19-III. The respondents did not specifically deny this averment but argued that the petitioner had not provided particulars of the manufacturers who were being subjected to duty under Item No. 19-I. The court found no justification for treating the petitioner differently from other manufacturers of flocked materials.

5. Timeliness of the Petitioner's Challenge Against the Central Government's Order:
The respondents argued that the petition was belated as it was filed in 1979, challenging an order dated 23rd January, 1978. The court rejected this argument, noting that the petitioner had obtained relief through subsequent trade notices and the Assistant Collector's order dated 9th May, 1979. The cause of action for the petitioner arose afresh when the Assistant Collector reversed the classification on 3rd November, 1979.

Conclusion:
The court concluded that the petition had merit and quashed both the Central Government's order dated 23rd January, 1978, and the Assistant Collector's order dated 3rd November, 1979. The classification made by the Assistant Collector on 9th May, 1979, under Item No. 19-I was sustained. The respondents were directed to realize excise duty on the flocked material produced by the petitioner under Tariff Item No. 19-I and to refund any excess duty collected after 1st December, 1978.

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