1972 (3) TMI 30 - HC - Central Excise

Demand raised under Rule 9(2) was invalid if goods were cleared without payment of duty and were within the knowledge of the excise authorities

Summary

Issues:
1. Validity of demand under Rule 10A of the Central Excise Rules.
2. Entitlement to exemption under Notification No. 131 of 1962.

Detailed Analysis:

1. Validity of demand under Rule 10A:
The petitioners contested a demand issued under Rule 10A of the Central Excise Rules, claiming it to be invalid as ultra vires the provisions of the Central Excise Act. The court referred to a previous decision where a similar rule was held ultra vires due to lack of statutory backing. The Central Government Standing Counsel did not seek to sustain the demand under Rule 10A, proposing to rely on Rule 9(2) instead. However, the court cited its own decision that Rule 9(2) cannot be invoked in cases where goods were cleared without an earlier levy and with the knowledge of excise authorities. Consequently, the court held the demand under Rule 10A as invalid, as it could not be invoked based on previous judgments.

2. Entitlement to exemption under Notification No. 131 of 1962:
The petitioners sought exemption under Notification No. 131 of 1962, which exempted certain iron and steel products from excise duty. The notification specified that manufacturers applying for a license after a certain date would not be eligible for the exemption. The court determined that the license issued was personal to the licensee, and as the petitioners applied for a license after the specified date, they could not be considered as entitled to the exemption. The court rejected the petitioner's argument that they were merely renewing the earlier license held by the transferors, emphasizing that the license was non-transferable. Consequently, the petitioners were deemed ineligible for the exemption under the notification.

In conclusion, the court allowed the writ petition, noting that since the department did not seek to demand under Rule 10A and the demand could not be sustained under Rule 9(2), the petitioners were successful in challenging the order imposing the demand. The court ruled in favor of the petitioners, with no costs awarded.