1984 (11) TMI 71 - HC - Central Excise

Issues Involved:
1. Notification No. 169/72's retrospective effect.
2. Duty liability on blended yarn manufactured and consumed before Notification No. 169/72.
3. Applicability of Notification No. 62/72 and compounded levy scheme.
4. Legality of the demand for duty by the Revenue.
5. Adjustment of duty paid post-Notification No. 169/72.

Issue-wise Detailed Analysis:

1. Notification No. 169/72's Retrospective Effect:
The petitioner contended that Notification No. 169/72, dated 24th July, 1972, had no retrospective effect. The blended yarn manufactured and consumed before its promulgation was not liable to separate duty. The court agreed, stating, "Notification issued by Government on 24th July, 1972, is prospective and does not purport to withdraw the exemption, concession or privilege extended to the manufacturers on the manufactured article for the earlier period." Thus, the demand for duty on yarn manufactured and consumed before 24th July, 1972, was without legal basis.

2. Duty Liability on Blended Yarn Manufactured and Consumed Before Notification No. 169/72:
The petitioner argued that the blended yarn was manufactured and consumed in the production of fabric before 24th July, 1972, and hence, was not liable for separate duty. The court noted, "Blended yarn of 17,381.30 kgs. manufactured and consumed by the petitioner prior to 24th July, 1972, was not separately dutiable to duty." The court found that the authorities had ignored relevant provisions, leading to a manifest illegality.

3. Applicability of Notification No. 62/72 and Compounded Levy Scheme:
Notification No. 62/72, dated 17th March, 1972, allowed for a special procedure for blended yarn manufactured in composite textile mills, deferring duty collection to the point of fabric clearance. The court observed, "When this notification was in operation, availing the benefit of the special procedure and that notification, the petitioner had manufactured blended yarn in dispute and had consumed the same in the manufacture of a fabric called 'Cascade'." The court concluded that the exemption once earned was absolute, full, and final.

4. Legality of the Demand for Duty by the Revenue:
The court found the demand for duty by the Revenue to be without authority of law. It stated, "The very basis on which the proceedings were initiated, culminating in the levy of excise duty on blended yarn did not exist." The court further emphasized that the demand was "wholly misconceived and illegal."

5. Adjustment of Duty Paid Post-Notification No. 169/72:
The petitioner sought adjustment of duty paid from 24th July, 1972, to 5th December, 1972, towards any duty payable on blended yarn. The court held that the government should have examined this plea and granted relief if merited. The court noted, "Admittedly the Act and Notification No. 169/72, dated 24th July, 1972, do not provide for multiple levy on the very manufactured article." Thus, any higher rate of duty paid on fabric should have been adjusted.

Conclusion:
The court quashed the impugned orders and ruled in favor of the petitioner, stating, "On any view of the matter, the impugned orders which are manifestly illegal are liable to be quashed." The rule was made absolute, with each party bearing its own costs.

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