1971 (7) TMI 58 - HC - Central Excise

Issues Involved:

1. Interpretation of notifications and exemptions issued by the Excise Authorities regarding the levy of excise duty on soda ash.
2. Applicability of Rules 9, 10, and 10-A of the Central Excise Rules, 1944.
3. Validity of the Demand Notice for Rs. 1,71,098.10P.
4. Refund of Rs. 1,28,017.22P paid under protest.

Issue-wise Detailed Analysis:

1. Interpretation of Notifications and Exemptions:

The main issue in both Special Civil Applications revolves around the interpretation of certain notifications and exemptions issued by the Excise Authorities regarding the levy of excise duty on soda ash under the Central Excise and Salt Act, 1944. The petitioner, Tata Chemicals Limited, contended that the exemptions granted by the Central Board of Revenue allowed duty-free use of soda ash within the factory premises for industrial processes, provided the quantity did not exceed the specified limits (initially 8%, later reduced to 2%, and then raised to 3%).

The Court examined various circulars and notifications issued by the Central Board of Revenue, including those dated April 3, 1961, June 9, 1961, December 28, 1961, and February 13, 1963. It was concluded that the exemption limits were to be computed based on the total quantity of common salt used in all processes within the factory, irrespective of whether the process involved the purification of brine. The Court rejected the Excise Authorities' contention that the exemption was only applicable if soda ash was used for the purification of brine in the manufacture of specific products.

2. Applicability of Rules 9, 10, and 10-A of the Central Excise Rules, 1944:

The petitioner argued that their case fell under Rule 10 of the Central Excise Rules, which deals with recovery of duty short-levied through inadvertence, error, or misconstruction, and that the Demand Notice issued on July 3, 1963, was beyond the period of limitation specified in Rule 10. The Court, referring to the Supreme Court's decisions in N. B. Sanjana v. Elphinstone Spinning & Weaving Mills Co. Ltd. and J. K. Steel Ltd. v. Union of India, held that Rule 9(2) applies only to cases of clandestine removal or evasion of duty, which was not the case here. Therefore, Rule 10 was applicable, and the demand was time-barred.

3. Validity of the Demand Notice for Rs. 1,71,098.10P:

The Demand Notice for Rs. 1,71,098.10P issued on July 3, 1963, was challenged on the grounds that it was beyond the period of limitation specified in Rule 10 and that the petitioner had acted based on representations made by the Excise Authorities. The Court held that the Excise Authorities were precluded from demanding duty retrospectively due to their earlier representations that soda ash could be cleared duty-free on requisition slips without AR-1 forms. Consequently, the Demand Notice was quashed.

4. Refund of Rs. 1,28,017.22P Paid Under Protest:

In Special Civil Application No. 394 of 1968, the petitioner sought a refund of Rs. 1,28,017.22P paid under protest for different periods. The Court, reiterating its interpretation of the exemptions, held that the petitioner was entitled to the refund as the duty was collected contrary to the exemptions granted by the Central Board of Revenue.

Conclusion:

Both Special Civil Applications were allowed. The impugned orders of the Excise Authorities, including the Demand Notice for Rs. 1,71,098.10P, were quashed. The respondents were directed to refund Rs. 1,28,017.22P to the petitioner. The Court also granted a certificate for leave to appeal to the Supreme Court under Article 133(1)(b) of the Constitution, as the amount involved exceeded Rs. 20,000.

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