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TMI Blog1964 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of writs of Certiorari to quash the orders of the Assistant Collector of Central Excise demanding payment of excise duty in respect of the powerlooms owned by the petitioners and upon which they produce cotton fabrics. 2. The two petitioners are brothers who were previously carrying on a partnership business under the name and style of 'K.R. Ramier and Sons.' They had installed 20 powerlooms. On account of differences between them, the partnership was terminated on the 27th July, 1960. Thereafter, they made an application to the Textile Commissioner seeking his permission to divide the looms to enable each of them to operate 10 looms separately. Permission was granted on the 27th March, 1961. Each of the petitioners obtained a L-4 licence with effect from 1-5-1961. 3. During the period when the two brothers were operating the 20 looms as a partnership, they were paying duty of Rs. 1080/- and an additional duty of Rs. 648. When each of the brothers started operating on his own, the De partment assessed the excise duty payable by each at Rs. 900 together with an additional excise duty of Rs. 600. The authorities purported to make this demand on the basis of a notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts also, it is contended that though the petitioners were operating as partners, they cannot be regarded as persons who commenced manufacture of cotton fabrics for the first time on or after 1st April, 1961, nor can it be said that they acquired the 20 looms from any other person, for the 20 looms in question had always been owned by them jointly. It is claimed that the Department's inference that the proviso applies to the instant case is erroneous in law. 6. The counter-affidavit filed on behalf of the Assistant Collector, Central Excise, does not deny the facts that led to the creation of two separate mills having 10 looms each. The Department however contends that the power-looms were previously owned by the partnership concern and that the petitioners acquired 10 looms each from that partnership concern. It is further contended that there can be no denial of the fact that these petitioners commenced their manufacture in their individual capacity only after 1-4-1961. It is accordingly claimed by the Department that the conditions, laid down in the notification are fulfilled and that the higher rate of duty is payable by the petitioners by reason of the proviso. It is sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture prior to that date. Equally, there is no reason why a manufacturer, who acquires, power looms from another person, who is or had been a licensee, should suffer a similar disadvantage. While a person who purchases new power looms for the first time and starts manufacture after 1-4-1961 is liable to pay excise duty under the special procedure only on the basis of the number of looms which he ope rates, a person who acquires power looms from another who had been a li censee has to pay at a higher rate. 9. The same result follows even when he buys the looms from other manu facturer who has closed down his business. What reasonable connection it has with the object of the excise law, I for one am unable to see. The solitary sentence that is found in the counter-affidavit of the Department is that the purpose of the notification is the prohibitation of "further fragmentation". In what manner fragmentation is opposed to any of the principles underlying the Act has not been explained. If I may speculate, fragmentation is probably considered uneconomic. That may perhaps be grounded against his insisting on a minimum number of looms under a single licence. But whether a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o come into operation only on and from the date of grant of separate permission by the Textile Commissioner and that until then the business was to continue in partnership. It is the contention of the learned Government Pleader that in the light of these features, there was an acquisition of 10 looms each from the partnership which previously owned the assets. I am not very much impressed by this argument. Clearly, according to the terms of the agreement, the business of manufacture was carried on by the two brothers in partnership till 1-5-1961 when they obtained, the requisite permission from the Textile Commissioner. The previous licensee was not the firm. A copy of the form of L-4 licence that had been granted previously has been filed and it shows that it was granted to the two individuals, no doubt, as partners of Kaveti Weaving Mills. It was not expressed on its face to be a licence in favour of the firm. Whether that would be the proper inference to draw from this licence or not, the more important question is whether, even assuming that it was the firm that owned the power looms in question, there has been an acquisition by each of the petitioners in the manner which bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms from any other person who is or has been a licensee. The firm not being a person in the sense indicated, the above condition is not satisfied. On the other hand, as has been urged by the learned counsel or the petitioners, it was not the firm that was the licensee but the individual partners themselves. The two brothers were no doubt described as partners of Kaveti Weaving Mills. But the previous licence was not in the name of Kaveti Weaving Mills. That licence reads thus : "Messers, K.R. Sankarachari and K.R. Sundarachari, Partners of Kaveti Weaving Mills, Madurai, having undertaken to comply with the conditions prescribed in the Central Excise Rules…..are hereby authorised to manufacture power loom cotton fabrics during the year.." 15. This to my mind is undoubtedly a licence only in favour of the two individuals. If, therefore, there was a division of the looms as between the two persons who operated all the looms under a single licence, it cannot be regarded, notwithstanding the intrusion of a partnership, as an acquisition by these persons from another entity. It should follow therefore that the application of the provisio to the instant case is not justified by the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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