9911796707
TMI Blog1980 (9) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... as discovered that it has been paying duty under a wrong impression and belief that blended yarn of the kind manufactured by the petitioner was subject to excise duty under Item 18A of the First Schedule to the said Act. In the year 1972 Item No. 18E has been introduced to the First Schedule of the said Act. On 19th of June, 1965 by a notification, dated 19th of June, 1965 staple fibre of cellulosic origin of 1.5 denier and above falling under Item 18 was exempted from such duty of excise leviable under the said Act which was in excess of 10 paise per kilogram provided the procedure as laid down under Rule 56A of the Central Excise Rules was followed while spinning such yarn. By notification, dated 10th February, 1968 the effective rate was changed from 10 paise to 50 paise per kilogram. It is only in the year 1968 by notification the goods falling under Item 18A were brought within the purview of Chapter 7A. The respondents at all material times proceeded on the basis that the blended yarn manufactured by the petitioner fell under Item 18A and were covered by the notifications, dated 19th June, 1965 and 10th of February, 1968 and the petitioner also was under the same impression a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactured prior to 29th of May, 1971 but the Excise officer wrongfully and illegally prohibited the petitioner from utilising any further credit on account of duty paid staple fibre towards payment of duty of any further clearance of such stock manufactured before 23rd of May, 1971 and lying in the petitioner's factory on 29th of May, 1971. The petitioner objected to the said direction of the officer and submitted a statement to the excise authorities showing the rebate the petitioner was entitled to for the staple fibre consumed by the petitioner till 5 p.m. on 28th of May, 1971. By letter, dated 4th of April, 1972 the Inspector, Central Excise forwarded an extract of order passed by the respondent No. 1 Assistant Collector of Customs to the effect that the petitioner may credit relevant amount to the petitioner's R.G. 23 account in respect of the staple fibre used by the petitioner from 6th February, 1971 up to 21st of May, 1971 up to 700 hrs. for the manufacture of blended yarn. It was stated that the said amount would not be available to the petitioner for payment of any duty of any commodity manufactured by it. According to the petitioner no copy of the said order of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount on 5th of June, 1974. The respondent No. 1 without giving an opportunity of showing cause or a personal hearing, have rejected the petitioners claim for refund of the said sum of Rs. 59,515.14 in violation of the principles of natural justice and in violation of the provisions of the rules framed under the Excise Act. Thereafter the petitioner preferred an appeal but without giving any hearing to the petitioner the respondent has disposed of the appeal on 1st of February, 1975 and rejected the petitioners claim for refund. The said appeal of course permitted the petitioner to utilise the balance proforma credit particulars of payment of duty on the finished products made in combination of staple fabric falling under the same tariff as on 29th May, 1977 but however no refund was permitted. Thereafter a revision petition was filed to the Joint Secretary Government of India by the petitioner. The said revision petition was rejected on 15th of October, 1976. The respondents Nos. 3 4 i.e. Appellate Collector as also the Joint Secretary accepted the fact that the petitioner was entitled to utilise the credit in respect of the blended yarn manufactured prior to 29th May, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended yarn was not excisable until 17th March, 1972 so under the mistaken belief and impression the petitioner paid excise duty on blended yarn under Item 18A ever since 19th November, 1965. Hence those recovery of duty by the Excise authorities according to the petitioner is illegal and as those duties have been paid under mistaken belief those are refundable to the petitioner as indicated earlier. It is the petitioner's case that the petitioner has come to know only in the year 1977 as per legal advise, in view of the judgment passed by the Gujarat High Court on 15th of June, 1976 in Ahmedabad Manufacturing Calico Printing Co. Ltd. v. Union of India where it has been held that such blended yarn was not excisable either under Item 18 or under 18A of the First Schedule. Thereafter the petitioner immediately applied for refund of the excise duty paid but the same prayer was rejected by the respondent by the order, dated 16th April, 1968. 6. In the affidavit filed by Bimala Kanto Ghosh the Assistant Collector of Central Excise the entire procedure for payment of excise duty have been stated, specially the procedure whereunder the exemption was granted in respect of staple fibre of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g thereby complete withdrawal of the exemption hitherto extended under the notification, dated 19-6-1965 for using of duty paid staple fibre in the manufacture of yarn in ad-mixture with cotton. (i) By Finance Bill 1972, which subsequently became Finance Act, 1972, certain changes in the tariff description of goods as appearing in the said First Schedule in respect of certain items including Item Nos. 18 and 18A were effected. The description of the products under the said Item Nos. 18 and 18A of the said First Schedule (as amended) are set out below. Item No. Description 18. Rayon and synthetic fibres and yarn, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power. Explanation.-"Rayon and synthetic fibres and yarn" shall be deemed to include (i) man-made fibres (ii) spun (discontinuous) yarn containing not less than 90% by weight of man-made fibres calculated on the total fibre content; (iii) man-made filament (continuous) yarn; and (iv) man-made metallic yarn. 18A Cotton twist, yarn and thread, all sorts, containing not less than 90% (nin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification should attract duty at the rates specified in column 3 of the said table provided the manufacturer elected to avail himself of the special provisions contained in the said Rule 96W. (m) By a notification namely, Notification No. 163/73, dated August 25, 1973 the Central Government substituted the hitherto existing provisions of clause (VI) of sub-rule (3) of Rule 56A of the said Rules. The substituted, clause (VI) of the said sub-rule(3) is set out below :- (VI) (a) The credit of duty allowed in respect of any material or component parts may be utilised towards payment of duty on any finished excisable goods for the manufacture of which such material or component parts were permitted to be brought into the factory under sub-rule (2) or where such material or component parts are cleared from the factory as such, on such material or component parts. (b) No part of such credit shall be utilised save as provided in sub-clause (a) or shall be refunded in cash or by cheque. (VI-a) (a) The credit of duty allowed in respect of any material or component parts used in the manufacture of finished excisable goods exported under bond and lying un-utilised immediately before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otton twist yarn or thread of all sorts fell under 18A of the First Schedule of the said Act and relying on the clarification given by the Central Government Board of Excise and Customs of Collector of Central Customs Central Excise and Customs, West Bengal issued a Trade Notice No. 88-Cotton Yarn-4/63, dated 30th September, 1963 bringing it to the notice of the trade and industry that assessment of blended yarn containing various proportion of different fibre contents should be classified under different tariff description as appearing in the First Schedule in accordance with the proportion of natural, man-made fibre contained to the finished yarn as specified therein. According to the said trade notice staple fibre yarn falling under Item 18 was a yarn which contained more than 90% by weight of staple fibre. Some of the blended yarns were to be treated as cotton yarns falling under Item 18A to the First Schedule if the same contained. (a) Not less than 60 per cent by weight of cotton when mixed with - wool and/or silk. (b) if it contained not less than 40 per cent by weight of cotton when mixed with jute. (c) If it contained not less than 10 per cent by weight of cotton whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esultant product was classified as cotton fabric and it was considered to be covered under18A. In fact the petitioner had taken advantage of the proforma credit granted in R.G. 23. According to the respondents the blended yarn with cotton content of 60% and above with the mixture of staple fibre as produced by the petitioner was known to the market as cotton yarn. 18A at all material times was not confined to cotton yarn only. According to the respondents I18A also covered yarns manufactured by blending it with the other synthetic fibres. 11. From the notification, dated 30th September, 1963 as annexed to the said affidavits of the respondents it would appear that doubts have been raised and expressed regarding cotton yarns which are spun out of mixed fibres and which contained in addition to other fibres such as wool, cotton, terylene, nylon or decron fibres. Hence by the said notification the term 'fibre', 'staple fibres' were clarified for the purpose of assessment and also yarns made out of the mixed fibres. Cotton yarn was defined as "Cotton fibre" if it : "(a) If it contains not less than 60% by weight of Cotton when mixed with wool and/or silk. (b) If it contains not l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in common parlance, as also in the commercial world should be given so that the products manufactured by the petitioner would fall under 18A i.e. under the category of cotton, but it is difficult to accept such construction in view of the fact that the products manufactured by the petitioner is not 100% pure cotton as it has been mixed with cellulosic fibre of 1.5 denier with 60% and above cotton. Hence clearly the petitioner's products do not come under 18A. There has been difficulties in construing such products. Hence the legislature thought it fit to introduce 18E to cover all those cases. 13. In the case reported in 1976 CENCUS page 25D a division bench of the Gujarat High Court held that levy of excise duty on blended yarn under Item 18 or Item 18A for cotton yarn was ultra vires. According to the said decision blended yarn become excisable for the first time on 17th March, 1972 when the legislature introduced Item No. 18E to cover blended yarn. By introducing 18E the legislature has definitely made it clear that earlier to the introduction of 18E there was no provision for levying the excise duty on articles which come within the definition of 18E. After the blended yarn b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the learned Judges it is not necessary to confine to the statutory rule for statutory refund and the Court may grant refund for three years. Although it is true that the petitioner has been paying excise duty on the basis of trade notice but in view of the fact that it is now being held that such levy and payment of duty under 18 and 18A were not permissible under law, hence the petitioner is entitled to ask for refund on that basis. 14. In the case reported in 1978 (2) E.L.T. (J 154) (S.C.) = AIR 1975 S.C. page 813 (Messrs D.Cawasji Co. v. State of Mysore) it has been held that :- "Where a suit would lie for recovery of monies paid under a mistake of law, a writ petition for refund of duty within the period of limitation prescribed i.e. within three years from the date of the knowledge of the mistake would also lie. For filing a writ petition to recover the money paid under a mistake of law, this Court has held that the starting point of limitation is from the date on which the judgment declared as void the particular law under which the tax was paid as that would normally be the date on which the mistake becomes known to the party. If any writ petition is filed bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition or description given to 18 18A have not been clear, so far the purpose of clarifying the same, trade notification was given. 17. Mr. N.C. Roy Chowdhury appearing on behalf of the respondents submitted that 18E was introduced by way of caution. It is difficult to appreciate that submission in view of express provision being made under 18 and 18A and without any guidelines or test being laid as to which would amount 'cotton' and 'cotton of all sorts' it is difficult to include blended yarn under the said category. 18. In the case reported in 1976 S.C. Page 2243 it has been held that : "Refund of illegal taxes stands on a different footing from claiming refund of surcharge paid under terms and conditions of permits. The only basis of tax is legislative sanction and if the legislative sanction fails, the collection of tax cannot be sustained." 19. Under the Limitation Act the period of limitation does run until the plaintiff has discovered the mistake or could with reasonable diligence have discovered it. In a case where payment is made under a mistake of law mistake becomes known to the party only when a Court makes a declaration as to the invalidity of the law though ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
