1995 (12) TMI 79 - HC - Central Excise

Words and Phrases - Natural cause - Meaning and scope - Remission of duty - Writ jurisdiction - Appeal

Issues Involved:
1. Demand for excise duty on cement clinker shortages during transport.
2. Authority to demand excise duty under Rule 196 of the Central Excise Rules.
3. Time limitation for issuing notices under Section 11A of the Central Excises and Salt Act.
4. Marketability of cement clinker as an excisable commodity.
5. Requirement of clearance from the High Power Committee for disputes involving public sector undertakings.
6. Availability of alternative remedy under Section 35G of the Act.

Detailed Analysis:

1. Demand for Excise Duty on Cement Clinker Shortages During Transport:
The petitioner, U.P. State Cement Corporation Limited, operates split location plants at Dalla, Churk, and Chunar for manufacturing cement. Cement clinker produced at Dalla and Churk is transported to Chunar, where it is used to make cement. The petitioner was granted permission to transport cement clinker without payment of excise duty under certain notifications. However, the handling and transport of clinker resulted in losses, leading to demands for excise duty on the unaccounted-for quantities. The petitioner argued that these losses were natural and unavoidable due to the nature of clinker and the conditions of transport. The court found that the losses were indeed natural, incidental, and unavoidable, and thus, the excise duty could not be demanded for these shortages.

2. Authority to Demand Excise Duty Under Rule 196 of the Central Excise Rules:
Rule 196 allows authorities to demand excise duty on exempted goods not duly accounted for unless shown to be lost or destroyed by natural causes or unavoidable accidents. The court held that the losses during transport were natural and unavoidable, and the authorities had no basis to demand excise duty for these shortages. The rule's scope includes losses due to normal handling and transport conditions, which were applicable in this case.

3. Time Limitation for Issuing Notices Under Section 11A of the Central Excises and Salt Act:
In Writ Petition No. 915 of 1995, the petitioner contended that the notice issued on 20th February 1984 for the period 1st October 1980 to 30th November 1982 was barred by time under Section 11A of the Act, which prescribes a six-month limitation period. The court agreed, noting that the extended period of five years for issuing such notices applies only in cases of fraud, collusion, or wilful misstatement, none of which were alleged against the petitioner. Therefore, the notice was without jurisdiction and barred by time.

4. Marketability of Cement Clinker as an Excisable Commodity:
The petitioner argued that cement clinker is not a marketable commodity and thus not subject to excise duty. The court dismissed this contention, stating that the petitioner did not raise this issue before the lower authorities and did not provide evidence to support this claim. The court emphasized that cement clinker is listed as an excisable good in the Excise Tariff, and unless proven otherwise with substantial evidence at the appropriate stages, it remains subject to excise duty.

5. Requirement of Clearance from the High Power Committee for Disputes Involving Public Sector Undertakings:
The respondents cited Supreme Court judgments requiring clearance from a High Power Committee for disputes involving public sector undertakings before approaching the court. The court clarified that these judgments apply to disputes between the Union of India and public sector undertakings, not between the Union of India and state-owned corporations or companies. Therefore, the petitioner was not required to seek clearance from the High Power Committee.

6. Availability of Alternative Remedy Under Section 35G of the Act:
The respondents argued that the petitioner should have sought a reference to the High Court under Section 35G of the Act instead of filing a writ petition. The court acknowledged this alternative remedy but noted that the same controversy was already before the court in other writ petitions. Given the circumstances and the inefficacy of the alternative remedy, the court decided to address the issue under its writ jurisdiction.

Conclusion:
The writ petitions were allowed, and the impugned orders, including the notices issued under Section 11A of the Act and the demands raised by the Assistant Collector and the Collector of Central Excise, were quashed. The court assessed costs at Rs. 2,000/- in each writ petition.

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