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TMI Blog1986 (10) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Pvt. Ltd., Andheri, (2) M/s. Orkay Textiles Corporation, MIDC, Patalganga, (3) M/s. Orkay International, MIDC, Patalganga, (4) M/s. Devang Textile Pvt. Ltd., Andheri, and (5) M/s. Bombay Dyeing and Mfg. Co. Ltd., Bombay, subject to the following conditions (1) should maintain detailed accounts of goods sent for draw texturising and for such goods received back to the factory of origin; (2) duty on such goods shall be paid at the appropriate rate at the time of final clearance of the goods; and (3) to execute necessary general bond of an appropriate amount for removal of semi-finished goods sent for draw texturising. 3. The Assistant Collector of Central Excise, Kalyan by his letter, dated 11-3-1983 withdrew the permission granted to M/s. Orkay by his letter, dated 17-5-1982. After a lapse of nearly ten months, M/s. Orkay represented to the Assistant Collector that the reasons assigned for withdrawal of the permission are no reasons at all and requested the Assistant Collector to restore the Rule 56B facility. In this representation M/s. Orkay stated, among other things, that the shelf life of POY is limited and by its very nature it cannot be preserved for long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 984 E.L.T. (16) 278 May 84. In the case under consideration, it is seen that POY is used not only for the appellants use but also sold outside to various customers. This being the case, POY can be regarded as both semi-finished and finished. Where it is required for the appellants use after texturisation for purposes of weaving, then POY can be treated as semi-finished goods... In so far as sale of POY directly is concerned, the question of Rule 56B does not arise since they can be considered as finished excisable goods . Shri Senthivel submitted that the goods cannot be both finished and semifinished for the purpose of Central Excise Law. It could either be finished or semi-finished and it can never be finished and semi-finished simultaneously. Shri Senthivel urged whether the given goods is finished or semi-finished goods does not depend on its future use. In short, Shri Senthivel contended that end use of the goods is not a determinative factor in considering the question as to whether the goods are semi-finished or finished. He further urged that POY is a finished product; it is marketed as a finished product. The Central Excise Law classified the yarn into two categories, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order in The Reliance case needs to be reviewed and as such the present appeal may be referred to a larger Bench. 10. Elaborating his contention, Shri Jagtiani submitted that the view taken by the Bench in The Reliance case that excise duty is leviable only on finished goods and that no excise duty is leviable on the semifinished goods is incorrect. Such a view overlooks the clear provisions of Rule 56B. Rule 56B is applicable to excisable goods which are semi-finished. If the goods are not excisable, the question of applicability of Rule 56B would not arise at all. It is only when goods has attained excisability stage then only the question as to whether the goods are semifinished has to be considered. Shri Jagtiani gave an illustration of a steel chair which required painting. He submitted that the chair might have attained excisability stage before painting or polishing and therefore Rule 56B would be applicable for removing the chairs for the purpose of painting and polishing. Shri Jagtiani contended textured yarn and non-textured yarn are yarns. The non-textured yarn, which is a semi-finished yarn, is removed for further processing to make it a textured yarn which again is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, there was no need to obtain any licence. Further, admittedly M/s. Orkay had sold POY and in the invoices they had described POY as filament yarn thus the appellants themselves understood POY as finished goods. The Collector (Appeals) also held that POY which is removed for the purpose of sale is finished goods. If the POY is finished goods under Rule 56B the Collector cannot permit for its removal for the manufacture of textured yarn. The textured yarn and non-textured yarn are two different commodities and they fall under two different sub-items, of a tariff item. Shelf life of POY cannot be a ground to hold that it is a semi-finished goods. Shri Senthivel submitted that this contention, which was urged before the Collector (Appeals) has been rejected by the Collector (Appeals). 16. Shri Senthivel also submitted that the expression excisable goods was employed in Rule 56B to distinguish the goods from non-excisable goods. He urged that prior to the introduction of tariff item No. 68 in the year 1975 several goods were non-excisable goods. The Rules including Rule 56B were framed in the year 1944 and necessarily the Rule making authority had to employ the word excisable goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Collector (Appeals) was not the order, dated 11-3-1983 by which he withdrew the permission granted under Rule 56B but the order, dated 2-2-1984 which order was made after considering the representation made by the appellant on 18-1-1984. And that order does not suffer from any infirmity. In the said circumstances, the contentions urged by the learned Advocate that the order of the Assistant Collector granting permission remained intact cannot be accepted. 22. Finally, Shri Senthivel submitted that the decision taken by this Bench in M/s. Reliance Textiles is correct and legal and there is no need to refer the matter to the larger Bench. 23. In reply, Shri Jagtiani submitted that no power of review is conferred on the Assistant Collector and the order, dated 17-2-1984 should be treated as an extension of the order, dated 11-3-1983. The analogy of Section 11A and Rule 173B, according to Shri Jagtiani, are not relevant since they incorporate built-in machinery. Shri Jagtiani submitted that the Respondent is not required to file an appeal against the observations when the Collector (Appeals) had allowed their appeal and granted the relief sought by them. Finally, Shri Jagt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to be challenged before a higher authority. Even under law, the orders dated 17-5-1982 and 11-3-1983 cannot be treated as decision or adjudication order. The statute, namely, Rule 56B conferred on the Collector a power to permit a manufacturer to remove excisable goods which are in the nature of semi-finished goods , for carrying out certain manufacturing processes by special order and subject to the execution of a Bond by the manufacturer and subject to such conditions as the Collector may specify. It appears this power was delegated to the Assistant Collector. M/s. Orkay made an application, dated 22-2-1982 under Rule 56B seeking permission to send the Polyester Filament Yarn to five parties for draw texturisation. The Assistant Collector did grant the permission sought. The order granting permission, though statutory was a purely discretionary and the same cannot be treated as a decision or adjudication order as is understood by law. At that stage, there was no lise, no dispute. There were no two parties also. The Assistant Collector could have refused permission. He was not required to issue show cause notice or hear the applicant. In the circumstances, the said order does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Collector granted permission by his order, dated 17-5-82 he did not pass that order as an adjudicating authority. As stated earlier, that order of the Assistant Collector was neither a decision nor an adjudication order as legally understood. In the case of Province of Bombay v. Khusaldas S. Advani, AIR 1950 Supreme Court Justice Fazal Ali observed : The word decision in common parlance is more or less a neutral expression and it can be used with reference to purely executive acts as well as judicial orders. The mere fact that an executive authority has to decide something, does not make the decision judicial. It is the manner in which the decision has to be arrived at which makes the difference and the real test is. Is there any duty to decide judicially? 27. According to Concise Oxford Dictionary to decide means: Settle (question, issue, disputes), by giving victory to one side; giving judgment (between, for, in favour of, against), bring, come, to a resolution, and decision means settlement (of question, etc.), conclusion, formal judgment, making up one s mind, resolve, resoluteness, decide character." 28. When the Assistant Collector granted permission he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assistant Collector was without jurisdiction and invalid in law has become academic and therefore there is no need to record any finding. Point No. 4: The premises of Shri Jagtiani that the decision of this Bench in M/s. Reliance Textile Industries case was based mainly on the three grounds referred to in his argument, is not correct. One of the questions that arose for consideration in M/s. Reliance Textile Industries case was whether POY is a semi-finished or in the nature of semi-finished goods and the other question that arose for consideration was what is the true scope and ambit of Rule 56B. The Bench in the first instance referred to Rule 56B itself. The Bench observed: The Collector can authorise removal of excisable goods (finished goods) in Bond for the purposes of carrying out tests only and not for any other purpose. In respect of excisable goods which are in the nature of semi-finished goods, the Collector may permit a manufacturer to remove such goods for carrying out certain manufacturing processes. The Rule makes it clear that the goods which are permitted to be removed by a manufacturer from a premises of his to another premises of his, is required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h observed: POY is an identifiable item and marketed as such and known as such in the market. Drawing and texturising of POY is for manufacture of fabrics and not for the processes of manufacture of POY itself. The use of POY at any subsequent stage would not make it a semifinished goods. The contention of Shri Nariman that whether a product is finished or semi-finished should be judged from the point of view of the manufacturer appears to us is not a sound contention. The contention of Shri Nariman, if pushed to its logical conclusion would imply that the texturised filament yarn produced by The Reliance, though a finished product, would be a semi-finished product for a manufacturer of fabric. But then under Rule 56B a finished product can be allowed to be removed only for the purpose of carrying out tests and to no other purpose. Therefore the Collector cannot authorise removal of texturised yarn on an application of a manufacturer of a fabric because for the purpose of Central Excise Law, texturised yarn is a finished product and the permission that could be granted by the Collector would be for its removal for the purpose of carrying out tests and not for its use in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Law. It makes provision for removal of finished goods without payment of duty for manufacture of a different excisable goods. 37. The violation of Rule 9 of the Rules was on the ground that the application of The Reliance was for removal of POY for the manufacture of texturised filament yarn. Since POY and textured yarn are two different excisable articles, removal of one excisable article for manufacture of another excisable article, without payment of duty, would violate Rule 9 of the Rules. 38. The Bench considered the contention of Shri Nariman that the removal of POY will only result in postponement of duty. The Bench observed : Even assuming that it results in postponement of duty even then the Collector has not been authorised under Rule 56B to permit removal of a finished product for the manufacture of another finished product even if the manufacturer of both the products is one and the same person . 39. The Bench also considered the contention of Shri Nariman based on the definition of POY. POY is defined as a filament yarn which is incompletely drawn. While considering this contention, the Bench observed : The request of The Reliance is not for further d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd contended that the permission to be granted by the Collector is to remove excisable goods for carrying out certain manufacturing processes. By reason of the expression excisable goods employed in Rule 56B, Shri Jagtiani urged that it is only when goods have attained excisability stage that the question whether they are semi-finished has to be considered. To bring home his point, Shri Jagtiani gave the illustration of a steel chair which required painting. He submitted that the chair might have attained excisability stage before painting or polishing and therefore Rule 56B would be applicable for removing the chairs for the purposes of painting and polishing. It is true that Rule 56B is applicable to excisable goods only. That does not mean that the goods should have attained excisability stage to permit their removal. There is a clear distinction between excisable goods and goods exigible to excise duty . The expression excisable goods is employed in Rule 56B as descriptive of the goods in contra distinction to non-excisable goods. The expression excisable goods was not employed to indicate that the goods should have become exigible to duty before it could be permitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished or unfinished commodity. 45. It was the contention of Shri Jagtiani that Rule 56B is not an exception to Rule 9. He, however, have it that Rule 56B contemplates postponement of payment of duty. If Rule 56B is not an exception to Rule 9 and if POY is a finished product, as has been held by us, then there is no scope to escape the applicability of Rule 9 or Rule 49 before POY could be removed from one factory to another. The postponement of payment of duty arises only if POY is held to be semi-finished and the further processing required is to make the semi-finished into finished product. The permission sought by M/s Orkay was not for carrying out further manufacturing processes so as to make POY a completed product but on the other hand, the permission sought was for drawing and texturising the POY by which processes POY gets converted into a new excisable goods, namely, texturised filament yarn. 46. As a matter of fact, in the case of M/s Reliance Textile Industries case, Shri Nariman had contended that the removal of POY will only result in postponement of payment of duty. The Bench did not accept this contention. The Bench further observed that even assuming that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies for permission. The Bench rejected this contention by observing : The contention of Shri Nariman if pushed to a logical conclusion would imply that the texturised filament yarn produced by The Reliance, though a finished product, would be a semi-finished product for a manufacturer of a fabric. But then under Rule 56B a finished product can be allowed to be removed only for the purposes of carrying out tests and to no other purposes. Therefore, the Collector cannot authorise removal of texturised yarn because for the purpose of Central Excise Law textured yarn is a finished product and the permission that can be granted by the Collector would be for its removal for the purposes of carrying out tests and not for its use in the manufacture of a fabric . We are unable to accept the contention of Shri Jagtiani that Rule 56B is intended to minimize the loss to a manufacturer. It is a facility granted to the manufacturer to remove the goods, which is in the nature of semi-finished for subjecting it to further processing so as to make it a completed product. There may be a manufacturer who may not have all the required machinery or equipments in his own factory or under one roof for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 83, dated 1-7-1983 exempts textured yarn falling under sub-item II(i)(b) item 18 of the First Schedule to the Central Excise from the whole of duty of excise leviable thereon provided duty had already been paid in respect of filament yarn used in the manufacture of such textured yarn. It is not clear how this Notification support the contention of Shri Jagtiani that even the Government of India had contemplated removal of POY under Rule 56B. If Shri Jagtiani s interpretation of this Notification is correct, it only means if duty had been paid at POY stage, textured yarn is exempt from payment of duty. This Notification or the other Notifications relied on by Shri Jagtiani cannot be interpreted to mean that non-payment of duty on POY could be possible only when POY was allowed to be removed under Rule 56B. The liability to pay duty is on the assessee who seeks to remove texturised yarn. He can claim exemption from payment of duty if he establishes that duty had been paid on POY which was the same material or out of which texturised yarn was manufactured. This is possible when a manufacturer of textured yarn purchases duty paid POY either in the open market or through the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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