1980 (4) TMI 134 - HC - Central Excise

Summary

Issues:
Challenge to excise authorities' orders and demand notices under Article 226 of the Constitution. Limitation period for recovery of duties or charges short-levied. Interpretation of exemption notifications regarding payment of excise duty on raw materials. Application of different notifications for exemption. Clarity on raw materials used by petitioners for manufacturing flats.

Analysis:
In the case, the petitioners, a partnership firm engaged in manufacturing iron and steel products, challenged various orders and demand notices issued by the excise authorities under Article 226 of the Constitution. The first issue addressed was the limitation period for recovery of duties or charges short-levied. The Court held that the notice issued beyond the limitation period for the period prior to 8th June 1970 was barred by limitation, as per Rule 10 of the Central Excise Rules. The notice served on 8th June 1971 was considered time-barred for the period from 1st June 1968 to 8th June 1970. However, it was within limitation for the period from 9th June 1970 to 30th June 1970, and the demand for the barred period was not sustainable (M.P. No. 851 of 1974).

Regarding the interpretation of exemption notifications related to payment of excise duty on raw materials, the Court analyzed Notification No. 75/67-C.E. and Notification No. 125/66-C.E. The authorities required proof of actual payment of duty for exemption under Notification No. 75/67, but not for Notification No. 125/66. The Court disagreed with this distinction, holding that both notifications should be interpreted to mean that duty "ought to have been paid" rather than "actually paid." The obligation to pay duty on raw materials used for manufacturing rests with the manufacturers of those materials, not the purchasers. The Court cited a previous decision to support this interpretation (M.P. No. 851 of 1974).

The Court also raised concerns about the clarity on the raw materials used by the petitioners for manufacturing flats. It noted that the authorities did not determine whether the raw materials fell under the description of articles in Item No. 26AA, which was crucial for applying the relevant exemption notification. As a result, the Court remanded the cases to the Superintendent, Central Excise, Raipur, for further examination and appropriate orders (M.P. No. 851 of 1974, M.P. No. 852 of 1974, M.P. No. 145 of 1977).

In conclusion, the Court allowed the petitions, quashed the demand notices and orders confirming them, and remanded the cases for fresh orders in accordance with law. The security amount was to be refunded to the petitioners, and no costs were awarded in these petitions.