1993 (1) TMI 79 - SC - Central Excise

Whether the duty of excise in respect of Tariff Item Nos. 18A(ii), 18(III)(ii) and 18E is to be levied and collected on the weight of the unsized yarn and not on the basis of the weight of the sized yarn? Held that - J.K. Cotton Mills will be applicable to all types of cases under Items 18-I, 18-III and 18E. The result is that all the aforesaid writ petitions are accepted and the impugned show cause notices are quashed.

Summary

Issues:
Interpretation of excise duty on yarn at intermediate stage, retrospective amendment of Rules 9 and 49 of the Central Excise Rules, constitutional validity of Section 51 of the Finance Act, 1982, applicability of excise duty under Tariff Items 18-I, 18-III, and 18E, challenge to impugned show cause notices.

Analysis:

The judgment dealt with writ petitions under Article 32 of the Constitution concerning the interpretation of excise duty on yarn at an intermediate stage and the retrospective amendment of Rules 9 and 49 of the Central Excise Rules. The case involved Tariff Item Nos. 18A(ii), 18(III)(ii), and 18E, where the duty of excise was disputed to be levied on the weight of unsized yarn, not sized yarn. The Delhi High Court's decision and subsequent circular by the Central Board of Excise were central to the dispute.

The High Court upheld the validity of Section 51 of the Finance Act, 1982, and the retrospective amendments to Rules 9 and 49 of the Rules. It concluded that excise duty would be applicable to yarn produced at an intermediate stage and subjected to an integrated process for weaving into fabrics. However, sized yarn put into the process would not attract excise duty, as it does not change the nature of the commodity as yarn.

The judgment discussed the measure of excise duty under Tariff Items 18-I, 18-III, and 18E, which is based on weight "per kilogram." The decision in J.K. Cotton Mills was deemed applicable to all cases under these items. The impugned show cause notices issued post the decision of the Gujarat High Court were challenged, leading to the quashing of the notices to avoid multiplicity of proceedings.

The Supreme Court entertained the writ petitions due to the pending appeal in the J.K. Cotton Mills case and the lengthy duration since the issuance of the impugned notices. In the interest of justice and to prevent unnecessary proceedings, the Court quashed the impugned notices in all cases, thereby accepting the writ petitions and ordering no costs to be paid by the parties.