1985 (7) TMI 99 - HC - Central Excise

Intermediate products or captive consumption - Dutiability - Cess leviable on - Jute twine and yarn

Summary

Issues Involved:
1. Levy of cess under Section 9 of the Industries (Development and Regulation) Act, 1951 on jute twine and jute yarn.
2. Correctness of the Division Bench's views in Rameshwar Jute Mills Ltd. v. Inspector, Customs & Central Excise.
3. Impact of amendments to Rules 9 and 49 of the Central Excise Rules, 1944 and their retrospective effect.
4. Constitutionality of Section 51 of the Finance Act, 1982.

Issue-wise Detailed Analysis:

1. Levy of Cess on Jute Twine and Jute Yarn:
The primary issue was whether the cess under Section 9 of the Industries (Development and Regulation) Act, 1951 could be imposed on jute twine and jute yarn during the manufacturing process. The petitioner argued that these materials were not marketable products and were not removed from the factory premises, thus should not be liable to excise duty or cess. However, the respondent excise authority had created demands based on the quantity consumed within the factory.

2. Correctness of the Division Bench's Views:
The Division Bench in Rameshwar Jute Mills Ltd. v. Inspector, Customs & Central Excise had held that cess was not leviable unless the manufactured goods were removed outside the factory precincts. This case was challenged by the respondent based on conflicting precedent from J.K. Cotton Spinning & Weaving Mills v. Union of India, leading to the referral to a larger Bench for an authoritative decision.

3. Amendments to Rules 9 and 49 and Their Retrospective Effect:
The Finance Act, 1982 introduced amendments to Rules 9 and 49 of the Central Excise Rules, 1944, giving them retrospective effect from 1944. These amendments clarified that removal of excisable goods includes their consumption within the factory premises, thus bringing jute twine and yarn within the cess net. The petitioner conceded that post-amendment, their case would fall within the cess net unless the validity of the amendments or their retrospectivity was struck down.

4. Constitutionality of Section 51 of the Finance Act:
Section 51 of the Finance Act, 1982 gave retrospective effect to the amendments in Rules 9 and 49. The court held that Parliament has the plenary power to legislate retrospectively within constitutional limits. The petitioner could not challenge the constitutionality of Section 51, and the court found no legal infirmity in it. The retrospective amendments were thus upheld.

Conclusion:
The court concluded that the cess under Section 9 of the Industries (Development and Regulation) Act, 1951 could lawfully be imposed on jute twine and jute yarn in the manufacturing process. The amendments to Rules 9 and 49, with their retrospective effect, fundamentally changed the legal landscape, rendering the earlier Division Bench judgment in Rameshwar Jute Mills Ltd.'s case inapplicable. The court affirmed the constitutionality of Section 51 of the Finance Act, 1982, thereby upholding the validity of the retrospective amendments.