1973 (2) TMI 55 - HC - Central Excise

Summary

Issues Involved:
1. Taxability of the yarn as "Cotton Twist."
2. Whether the suit is barred by limitation under Section 40(2) of the Central Excises and Salt Act, 1944.
3. Entitlement to interest pendente lite and future interest.

Detailed Analysis:

1. Taxability of the Yarn as "Cotton Twist":

The appellant argued that the multiple fold yarn should be classified as "Cotton Twist" and thus subject to excise duty. The court examined the definitions provided in the "Mercury" Dictionary of Textile Terms and other relevant literature. The court noted that a multiple fold yarn remains a yarn and does not transform into "Cotton Twist" merely because it is twisted. The court emphasized that "Cotton Twist" is not a recognized term in textile terminology and that the multiple fold yarn is still considered yarn. The court also relied on the testimony of P.W. 2 Bhawani Shanker, a textile expert, who confirmed that multiple fold yarn is still yarn and not "Cotton Twist." The court concluded that the multiple fold yarn falls under the category of yarn and not "Cotton Twist," thus supporting the plaintiff's claim for exemption from excise duty.

2. Limitation under Section 40(2) of the Central Excises and Salt Act, 1944:

The appellant contended that the suit was barred by limitation under Section 40(2) of the Central Excises and Salt Act, 1944, which prescribes a six-month limitation period for suits related to actions done under the Act. The court examined the interpretation of the phrase "anything done or ordered to be done under this Act." The court referred to various precedents, including ILR (1964) 14 Raj. 847, AIR 1958 Pat. 439, and AIR 1967 A.P. 338, which held that actions taken without jurisdiction or illegally cannot be considered as done under the Act. The court concluded that the illegal recovery of tax does not fall under the ambit of Section 40(2) and thus, the suit was not barred by limitation.

3. Entitlement to Interest Pendente Lite and Future Interest:

The respondent filed a cross-objection seeking interest pendente lite and future interest. The court noted that the trial court had not provided any reasons for denying interest from the date of the suit to the date of realization. The court held that the plaintiff was entitled to interest pendente lite at the rate of 6% per annum from 20-9-1963 to 27-1-1966, as the amount was illegally recovered and the plaintiff was deprived of its use during the pendency of the suit. However, the court did not see any ground for awarding interest after the date of the decree since the decretal amount had been realized in full and no obstruction was placed by the defendant in the execution of the decree.

Conclusion:

The appeal was dismissed with costs, and the cross-objection was partly allowed to the extent of awarding interest pendente lite at the rate of 6% per annum from 20-9-1963 to 27-1-1966.