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TMI Blog1971 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion the producer or the manufacturer. The goods cannot be removed out of his possession without the payment of the duty. To ensure this, Rule 9(1) lays down that no excisable goods shall be removed from any place where they are produced or manufactured until the Excise Duty leviable thereon has been paid at such a place and in such a manner as is prescribed in these Rules and except on the presentation of an application in the proper form and on obtaining the permission of the proper officer on the form. Exceptionally, a Statute and the Rules framed thereunder may provide that the incidence of the Excise Duty is to fall not on the producer or the manufacturer but on the consumer or the purchaser after the goods have been removed from the possession of the producer or the manufacturer by sale etc. But this is not such as exceptional case. 3. The goods in question are manufactured out of iron ore. At an early stage of such manufacture iron ore is turned into steel ingots which are Item No. 26 of the First Schedule. The second stage consists of making of rails. The Hindustan Steel Limited made such rails of two kinds namely (1) Those suitable for the laying of rail tracks and (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the bars and rods manufactured by the petitioner were allowed to be disposed of by it as an exempted article without payment of Excise Duty without the application and the Nil assessment under Rule 9(1). 5. Subsequently, the authorities discovered that the Hindustan Steel Limited had not paid Excise Duty on the re-rollable scrap which was not fit for the laying Railway tracks even though the said re-rollable scrap was liable to pay such duty. The authorities thereupon issued a notice of demand to the petitioner asking it to pay the Excise Duty on bars and rods as stated in the First Schedule against sub-item 1(a) of Item No. 26AA. As the Duty on ingots had already been paid they deducted that duty from the demand. The petitioner protested against the demand on various grounds enumerated in Annexure P 9 to the writ petition addressed to the Assistant Collector, Central Excise. Briefly, it contended that the bars and rods manufactured by it at the third stage were exempted from duty. If the re-rollable scrap manufactured by the Hindustan Steel Limited at the second stage were liable to duty then the duty should be recovered from the Hindustan Steel Limited. But this is no rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner ? If so. under what law ? 9. The answer to question No. 1I depends on the correct construction of the language of the Notification No. 206/63. The crucial words are "re-rollable scrap on which the appropriate amount of Excise Duty has already been paid". It is admitted that the goods manufactured by the petitioner were made from re-rollable scrap. It is asserted by the respondents that the duty of excise on this re-rollable scrap had not actually been paid by the Hindustan Steel Limited. As the petitioner has no knowledge whether the Hindustan Steel Limited paid the duty or not, the assertion of the respondent may be taken to be true. On the one hand the respondent urged that it is for the petitioner to prove that the goods manufactured by it were entitled to the exception. To do so he must show that the goods were covered by the language of the notification. According to the respondent the exemption was conditional. The condition was that the Excise Duty should actually have been paid on the re-rollable scrap before the exemption applied to the goods manufactured by the petitioner, Shri Brijbans Kishore, the learned counsel stressed the words "has already been paid". Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisable goods. Under Rule 44, the Collector may require the manufacturer to make prior declaration of the factory premises in which the goods are to be manufactured. Under Rule 46, the premises are marked by the Collector. Under Rule 47, the goods may be stored in these premises prior to the payment of the duty. Under Rule 48 the manufacturer shall execute a bond for the payment of the duty, Rule 49 says that duty shall be chargeable only on the removal of the goods from the factory premises. Under Rule 50 even non-excisable goods can be removed only with the permission of the Collector. Rule 51 provides for the packing and weighment of the goods on which duty is to be levied. 10. Rule 52 lays down the procedure for payment of duty after which the permission to remove them would be granted by the Collector. Under Rule 52A, a gate pass has to be issued by the Excise Authorities to be manufacturer for removal of the goods from the factory. These provisions make it clear that even though the excise duty is not assessed on a person but no goods still the duty assessed on the goods have to be paid by the producer or the manufacturer before the goods are allowed to be removed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this word is used to mean "actually" then the exemption would not be available to the petitioner in the present case. Such a construction would, however, be contrary to the system of recovery and levy of Excise Duty under the Act and the Rules. This system secures that in all cases Excise Duty is recovered from the manufacturer before the goods are removed from the factory premises. Purchaser of goods from such a manufacturer are entitled to rely upon the system and to presume that the duty had already been recovered from the manufacturer. The exemption authorities issued instructions to purchasers of re-rollable scrap that goods manufactured by such purchasers from re-rollable scrap could be removed from the premises of such purchasers without observing the procedure prescribed by Rule 9(1). 13. It would be intolerable if the purchasers of manufactured goods were to be required to ascertain whether Excise Duty on the manufactured goods had already been paid by the manufacturer before the sale of such goods or not. Purchaser would have no means of knowing it. Hundreds and thousands of purchasers of such goods are made and in no case can any attempt be made by the purchaser to kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be removed from the premises of the Hindustan Steel under some inadvertence, error, collusion or mis-construction on the part of some officer or through mis-statement as to the description of the goods on the part of the Hindustan Steel. If so, the duty could be recovered from the Hindustan Steel only under Rule 10. But Rule 10 can be resorted to only within the prescribed limitation of three months from the date on which the duty was payable. The limitation must have expired before the Authorities became aware of the fact that the duty had not been paid. Their Lordships of the Supreme Court have already held in N.B. Sanjana's case, (1971) 1 SSC 337 = (AIR 1971 SC 2039) (Supra) that Rule 10A could not be applied to a case to which Rule 10 was applicable inasmuch as Rule 10A was a residuary rule. Rule 9 could not be applied for the recovery of the duty from Hindustan Steel as there was no possibility of the re-rollable scrap being clandestinely removed from the factory of the Hindustan Steel which is a respectable Government Undertaking. This is why the respondent have sought to recover the duty from the petitioner. 16. But the respondents met with the same difficulties in rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son why Rule 9 cannot apply. It applies only to "excisable goods". The definition of "excisable goods" under Section 2 (d) of the Act is "goods specified in the First Schedule" as being subject to duty of excise. The goods manufactured by the petitioner were excisable goods before the issue of Notification No 206/63 exempting them from payment of duty. The Notification was issued under the Act. According to Section 38, Rule 8 as well as the exemption Notification "shall have effect as if enacted in this Act". In Kailash Nath v. State of U.P., AIR 1957 SC 790 the Supreme Court observed that an exemption granted in pursuance of a notification issued under the U.P. Sales Tax Act was considered as having been contained in the parent Act itself. This observation is not affected by the fact that on another point namely, the maintainability of writ petition under Article 32, this decision was later over-ruled by the Supreme Court in Ujjain Bai v. State of Uttar Pradesh, AlR 1962 SC 1621. In J.K. Steel Ltd. v. Union of India, (1969) 2 SCR 481 = (AIR 1970 SC 1173), Hegde, J, considered the question, how far subordinate legislation made in the statute could be taken into account for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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