1987 (7) TMI 89 - HC - Central Excise

Summary

Issues Involved:
1. Liability of the consumer to pay excise duty.
2. Interpretation of the exemption notification.
3. Jurisdiction of the Assistant Collector of Central Excise.
4. Applicability of Article 226 of the Constitution for challenging the show cause notice.

Detailed Analysis:

1. Liability of the Consumer to Pay Excise Duty:
The central issue revolves around whether the petitioner, a consumer of newsprint, is liable to pay excise duty on the waste portions of the newsprint. The court emphasized that "Excise duty is a duty on manufacture of goods, the taxable event being the manufacturer of such goods." The petitioner argued that it is not the manufacturer of the wasted portions and hence not liable to pay excise duty. The court agreed, stating that excise duty is primarily levied upon a manufacturer or producer and not a consumer. The petitioner, being merely a consumer, cannot be considered an assessee for excise duty.

2. Interpretation of the Exemption Notification:
The court analyzed the Exemption Notification No. 163/67-CE., dated 21-7-1967, which exempts newsprint from excise duty provided it is intended for use in printing newspapers, textbooks, or other books of general interest. The second proviso allows waste arising in the process of printing to be used without payment of duty if the proper officer is satisfied that the waste is genuine and cannot be used again. The court clarified that the exemption notification benefits the manufacturer, not the consumer. The court further noted that the sale of waste by the consumer does not attract excise duty as it is not a manufacturing activity. The court stated, "Sale of the wastes may attract Sales tax, Income tax etc., but for such sale excise duty cannot be charged from the consumer under any circumstances."

3. Jurisdiction of the Assistant Collector of Central Excise:
The petitioner contended that the Assistant Collector of Central Excise, Calcutta, who issued the impugned show cause notice, did not have jurisdiction as the manufacture of the newsprint took place in South India. The court, however, found this point irrelevant because the show cause notice itself was ultra vires the Central Excises and Salt Act, 1944, and was issued without proper application of mind.

4. Applicability of Article 226 of the Constitution for Challenging the Show Cause Notice:
The respondents argued that the petitioner should have exhausted the normal remedies available under the Central Excises and Salt Act, 1944, before approaching the court under Article 226 of the Constitution. The court rejected this argument, citing that a writ could issue if a show cause notice has been issued without jurisdiction. The court referenced the Supreme Court's decision in Hridaya Narain v. Income-tax Officer, A.I.R. 1971 S.C. 33, which held that if a writ petition is entertained and heard on merits, it cannot be rejected later on the ground that statutory remedies were not availed.

Conclusion:
The court concluded that the impugned show cause notice was issued based on a total misconception of the exemption notification and was without jurisdiction. The court directed the respondents to withdraw, recall, and cancel the impugned show cause notice and refrain from taking any further action based on it. The writ petition was thus allowed, and there was no order for costs.