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TMI Blog1996 (8) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... grant certain exemptions to the manufacturer who was merely a job worker. 2.The writ application was originally filed by the respondent writ petitioner M/s. Hindustan Development Corporation Ltd. praying inter alia that certain impugned notices dated 23-11-79, 22-5-80, 20-2-81 and 20-3-82 which were Annexures 3, 4, 5 and 8 respectively issued by the Superintendent, Central Excise, Bharatpur might be quashed and a finding be made by the writ court that the Union of India, Assistant Collector, Central Excise at Jaipur, Superintendent, Central Excise at Bharatpur and Collector, Central Excise at Jaipur be restrained from realising any duty from the writ petitioner-respondent on the basis of the value of rails supplied by the Railway Board to the petitioner for the period prior to April 1, 1981 by issuing the impugned show cause notices and/or any demands. It further prayed inter alia that the duty already paid by the writ petitioner-respondent on the clearance of points and crossings effected by it from March 1, 1975 to March 31, 1981 which was the only duty leviable in law and further to restrain the respondents Union of India, Assistant Collector, Central Excise at Jaipur, Superin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts for fabrication and supply of points and crossings to brief him its contention. It was further averred that the writ petitioner did not use any rails belonging to it in course of fabrication work except minor incidental materials and incidental components, the value of which was sought to be included in the fabrication charges in accordance with the terms of the contract. Thus no new article known to the trade emerged after the rails supplied by the Railway Board were subjected to necessary fabrication processes. 4.The Government of India in exercise of its powers under Rule 8 of the Central Excise Rules, 1944 issued a notification bearing No. 119/75-C.E., dated April 30, 1975 envisaging payment of excise duty only on the charges for the job work done and not on the total value of the articles when the articles leave the factory of the job worker. The notification is reproduced herein below : "Notification No. 119/75-C.E., dated 30-4-1975. Exemption to goods produced on job work basis. — In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods falling under Item No. 68 of the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notices to the writ petitioner requiring it to show cause to the Assistant Collector, Central Excise, Jaipur as to why it should not be required to pay the amount of duty specified in respect of its show cause notice. By show cause Notice No. CE 20/GW/68/79/2202, dated November 23, 1979 which related to the period from 1-3-75 to 23-11-79 amount of differential duty was to be determined on the basis of the causes shown in the Schedule. By show cause notice No. CE/20/GW/11/79/876, dated May 22, 1980 for the period 24-11-79 to 20-5-80 the amount of differential duty is to be determined on the basis of the causes shown in the Schedule. By the show cause notice bearing No. CE. 20/CEW/63/79/219, dated February 20, 1981 for the period 23-5-80 to 31-1-81 the amount of differential duty was to be determined similarly on the basis of the causes shown in the Schedule. These notices are Annexures 3, 4 and 5 with the writ petition. During the period from 1-3-75 to 30-4-78 the Railways did not supply the rails and the writ petitioner manufactured switches and crossings (points and crossings) for supply to the Railway; out of the rails purchased from the market and the writ petitioner paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, presumably because of the directions from the headquarters of the Central Excise. The Superintendent, respondent No. 3, however issued another demand cum show cause notice bearing No. CE.20/CEW/168/79/458, dated March 20, 1982 asking the writ petitioner to show cause why it should not be required to pay the differential duty of Rs. 39,09,184/- for the period from 14-3-78 to 15-8-80. 11.Despite a detailed reply having been submitted and the entire matter having been clearly explained to the Assistant Collector, the writ petitioner was surprised to receive another notice Annexure 8 which the writ petitioner vide its letter dated March 30, 1982 communicated to the Assistant Collector that the notice was illegal and improper and was based on incorrect facts, the writ petitioner further requested the Assistant Collector to furnish certain information in order to enable him to make a proper submission. The information related to the grounds for demanding duty for more than six months under Section 11A of the Central Excises and Salt Act. The grounds for holding that the exemption from duty under Notification No. 119/75-C.E., dated April 30, 1975 with regard to duty on job charges no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customer to the job worker cannot be taken into account while computing the real value of the goods manufactured on job work basis. The learned Advocate for the appellant referred to a Supreme Court decision in Voltas case reported in 1977 (1) E.L.T. (J 177) which governed the cost incurred by the manufacturer (job worker). 15.It was further averred that since the writ petitioner as a job worker could only charge for the job work done by it for the Railway Board according to the Notification No. 119/75, dated April 30, 1975, no other basis for assessing duty can be adopted except the job work charges. Hence the impugned show cause notices requiring the assessment of duty which was to be made on the basis of the value of the rails seems to be manifestly illegal and required to be quashed. It was contended that even though as a result of the conversion of crude diamonds into jewellery such as necklaces, ear-studs and nose screws, a new article emerged as has been held by the Madras High Court in Bapalal Co. v. Government of India reported in 1981 (8) E.L.T. 587 (Madras) the duty could be realised only on the labour charges being received by the job worker for converting the cru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from November 17, 1980 only. Section 11A of the Act cannot be applied in respect of the period from 14-3-78 to 15-8-80 since the provisions of Section 11A were not retrospective. 17.The impugned show cause notices Annexures 3 and 8 which pertain to the period from 1-3-75 to 15-8-80 were clearly barred by time and the writ petitioner could not be compelled to pay duty in respect of the clearance made during the said period even though it is taken for the sake of argument that the notification bearing No. 119/75, dated April 30, 1975 was not applicable to the writ petitioner. It was further averred that Section 11A could be invoked only in cases where duty has not been levied or paid or it was short levied on account of the fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of the statute or of rules with a final intent to evade payment of duty. In the present case the Central Excise Authorities were granting the benefit of exemption of the Notification No. 119/75 to the writ petitioner from the very beginning, inasmuch as, the requirements of the explanation were fully satisfied by the writ petitioner and there was no oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aratpur and the Collector, Central Excise, Jaipur are not entitled to call upon the writ petitioner to pay duty on the points and crossings supplied to the Railways, the dates being May 23, 1978 to March 31, 1981 inasmuch as, the Superintendent, respondent No. 3 had actually issued the impugned show cause notices Annexures 3, 4, 5 and 8 after taking directions from the Headquarters Central Excise, Jaipur giving out to the writ petitioner that the exemption under Notification No. 119/75 was not applicable to it and the duty should be paid on the value of the points and crossings under Section 4 of the Act and not as a result of the application of his mind to the facts and circumstances of the matter. The Superintendent, Central Excise, Bharatpur failed to exercise its jurisdiction which was vested in him by law and thus the impugned notices are required to be quashed. It was further averred that during the period from 1-3-75 to April, 1978 the writ petitioner had already paid duty on the basis of the value of the rails and as such the impugned notice was manifestly illegal since it included the period 1-3-75 to 30-4-78. It was further averred that the writ petitioner cannot be subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entitled to the benefit of limitation. 20.The learned Single Judge on perusal of the records and on hearing the rival contentions of the parties was prima facie of the opinion that the respondent writ petitioner was driven to file the present writ application only for the reason that the Assistant Collector was duty bound to determine the question factually as to whether the writ petitioner is entitled to the benefit of the Notification No. 119/75 or not. The Assistant Collector instead of deciding the matter in all finality raised a fresh demand. Instead of remanding the case to the Assistant Collector to decide the matter factually, the learned Single Judge thought it wise not to effect a remand since the question in controversy was very clear and it could be decided on the basis of admitted facts. The learned Single Judge accordingly, accepted the submission of the learned Advocate for the writ petitioner respondent to decide the matter as to the application of the Notification No. 119/75 finally. On the question whether after preparing these rails which were being supplied back to the Railways the writ petitioner was liable to pay excise duty on the total value of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation of excisable goods for the purpose of charging of duty of excise meant the normal price thereof, that is to say, the price at which such goods were ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not related to the seller and the price is the sole consideration for the sale. Reading Sections 3 and 4 as a whole, the court below held that even though the manufacturer is liable to pay excise duty on the whole of the goods which are despatched from its factory but at the same time the Government has been given a power to issue certain exemptions. Under Rule 8 of the Central Excise Rules, 1944, the Central Government could issue exemption notification as in Notification No. 119/75. According to the said notification the goods which were falling under Item No. 68 of the Tariff, manufactured in a factory as a job work envisaged payment of a duty on the basis of the amount charged for the job work. In the explanation to the exemption notification, it has been given out that job work should mean such items of work where an article intended to undergo manufacturing process is supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner respondent was perfectly right and justified when it contended inter alia that it was entitled to pay duty on the charges of the job work done by it and not on the whole of the goods manufactured. The learned Single Judge was invited in this particular perspective to persue the judgment of the Gujarat High Court in Anup Engineering Ltd., Ahmedabad and Others v. Union of India and others, 1978 (2) E.L.T. (J. 533). In this case there was an interpretation given to the Notification No. 119/75 where a Division Bench of the Gujarat High Court observed inter alia as follows : - "7. It is clear that by this notification, goods falling under Item 68 of the First Schedule manufactured in a factory as a job work are exempted from excise duty, except to the extent of the duty on charges for the job work. The explanation set out in the notification makes clear what is meant by 'job work' and job work, in the context of this notification means such items of work where the article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier after the article has undergone the intended manufacturing process, ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paints and Varnish Company Pvt. Ltd. v. Union of India and Another, 1985 (19) E.L.T. 80 (Bombay), the Bombay High Court has also taken a similar view that in case of job work despite even change in the nomenclature of the raw material at the hands of the job worker which has emerged as a new article also comes under the benefit of the notification. In the facts of this case the writ petitioner received from M/s. Coats of India Ltd. pigments, oils and toners with the help of which they resorted to a manufacturing process. The rotary news ink which was so manufactured was returned by the petitioner to M/s. Coats India Ltd. It was held by the Bombay High Court in this case that the benefit of the notification would be applicable to the writ petitioners. 23.In Precision Telecom Products v. Superintendent of Central Excise and Others, 1986 (24) E.L.T. 235 (Karnataka), the Karnataka High Court also took the same view relating to the application of the self same notification. In that case the petitioner obtained raw material from I.T.I, and was only collecting job charges on the same. The Karnataka High Court held that because of raw material supplied by the I.T.I. on job work basis wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndard Company v. Union of India, 1992 (60) E.L.T. 671 (S.C.) = AIR 1991 S.C. 1784 the question came up for interpretation as to applicability of Sections 3 and 4 but there was no reference to the notification under which the exemption was sought. The question was mainly to the effect whether the manufacturer after manufacturing the railway wagons and supplying them to the Railways were liable to pay duty of excise on the normal value of the wagon which included the value of the free supply items like wheel sets, axle boxes, etc., supplied free of cost by the Railways to the manufacturer for getting them fitted in the wagons so manufactured. On the question whether the petitioner was entitled to pay the excise duty on whole of the wagon including the items which were supplied by the Railways, the Supreme Court after referring to the charging Sections 3 and 4 held that there is no provision in the charging sections for giving any rebate on these items freely supplied to the manufacturer and held that it hardly mattered how and in what manner the components of the wagon were procured by the manufacturer, so long as it was manufacturing and producing the goods called wagons, it was lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended to give benefit of exemption of such job workers and in the present case rails which were being supplied by the Railway Board to the writ petitioner respondent for converting them into points and crossing remained the same, even after undergoing the manufacturing process and, therefore, the writ petitioner respondent-assessee was entitled to the benefit of the aforesaid notification. 26.After having decided the basic issue in favour of the writ petitioner-assessee, His Lordship however did not express opinion regarding the limitation which was pleaded by the writ petitioner as regards issuance of the notices contemplated under Section 11A of the Act. The learned Single Judge allowed the writ application and quashed the notices and the demands raised by the appellants. 27.Mr. P.P. Choudhary, learned Advocate for the appellants contended that the writ petitioner was not covered under the notification and was not liable for exemption as a job worker and they were lawfully called by the appellants to include the cost of rails supplied by the Railway Board and to pay excise duty on the finished end-products i.e. points, crossings and switches. The appellants further contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was right in holding that such manufacturer was not entitled to the benefit of the notification issued by the Central Government bearing No. 119/75, dated April 30, 1975. Taking into consideration the entire perspective we will be constrained to hold that it was an incumbent part of the duty of the Assistant Collector to decide the matter in all finality as to whether the Notification No. 119/75-C.E., dated April 30, 1975 was at all to apply in the facts and circumstances of the case. It was only because of the refusal on the part of the Assistant Collector to decide the matter in the context of his pressing demands for more duties that the writ petitioner-respondent was constrained to come to this High Court for relief. Perhaps it was not proper on the part of the learned Single Judge to have gone into the decision making process himself as to application of the exemption of the notification but once the learned Single Judge having done so and the ultimate decision not having been done in an arbitrary or illegal manner and there not having been any illegal interpretation or untoward meaning given to the purpose of the exemption, we think the ends of justice could be amply sat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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