2001 (12) TMI 85 - HC - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Principal Bench at Allahabad to hear the writ petitions.
2. Entitlement of the petitioners to the benefit of Notification No. 202/1988-C.E., dated 20-5-88 as amended by Notification No. 33 of 1992-C.E., dated 1-3-1992.
3. Onus of proving the duty-paid nature of the inputs used by the petitioners.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Principal Bench at Allahabad:

The respondents raised a preliminary objection regarding the jurisdiction, arguing that since the goods were purchased at an auction in Barabanki, which falls under the jurisdiction of the Lucknow Bench, the Principal Bench at Allahabad lacks jurisdiction. The petitioners countered that the cause of action arose with the passing of the order by respondent no. 2 at Kanpur, which is within the jurisdiction of the Principal Bench at Allahabad. The court agreed with the petitioners, citing a precedent from the Division Bench in Sahara India Limited v. Commissioner of Income-tax, Kanpur, which established that the cause of action arises where the impugned order is passed. Therefore, the court held that it had jurisdiction to hear and decide the writ petitions.

2. Entitlement to the Benefit of Notification No. 202/1988-C.E., as Amended:

The petitioners claimed exemption under Notification No. 202/1988-C.E., as amended, which exempts certain goods from duty if they are manufactured from duty-paid inputs. The petitioners argued that they used unserviceable rails, fishplates, etc., purchased from railway auctions, which were duty-paid. The court examined Sections 3, 3(1), and 3(1A) of the Central Excise Act and Rules 7 and 9 of the Central Excise Rules, which indicate that excise duty is levied and recoverable at the point of clearance by the producer, manufacturer, or curer of any excisable goods. Since the railway is not a manufacturer, producer, or curer, the goods auctioned by it should be deemed duty-paid. The court concluded that the authorities below erred in denying the benefit of the notification to the petitioners.

3. Onus of Proving Duty-Paid Nature of Inputs:

The court emphasized that under the explanation to the notification, all stocks of inputs in the country, except those clearly recognizable as non-duty paid, are deemed to be duty-paid. Therefore, the burden of proving that the inputs were non-duty paid rested on the Department. The court found that the Department failed to establish that the goods auctioned by the railway were non-duty paid. The authorities misdirected themselves by holding that the lack of registration of the railway with the Central Excise Department implied non-duty paid status of the goods. Consequently, the court held that the benefit of the notification was wrongly denied to the petitioners.

Conclusion:

The court allowed the writ petitions, quashed the impugned orders passed by respondent nos. 1 and 2, and declared that the petitioners are entitled to the benefit of Notification No. 202/1988-C.E., dated 20-5-88 as amended by Notification No. 33 of 1992-C.E., dated 1-3-1992.