1979 (1) TMI 104 - HC - Central Excise

Court remands case to Collector to determine tax liability of MNPT under Item 14D and reconsider Chapter VII-A applicability.

The court partially allowed the petition, remanding the case to the Collector of Central Excise to determine the tax liability of MNPT under Item 14D ... Duty liability - `Used' - Connotation of - Synthetic organic derivative - Classification of goods - Wrong order - Classification - Alternative remedy - Existence of Issues Involved:1. Liability of MNPT under Item 14D of the First Schedule of the Central Excises and Salt Act, 1944.2. Predominant use of MNPT in the dyeing process.3. Excise duty applicability on MNPT used within the factory for manufacturing other products.4. Maintainability of the petition under Article 226 of the Constitution.5. Refund of excise duty paid by the petitioners.Detailed Analysis:1. Liability of MNPT under Item 14D of the First Schedule of the Central Excises and Salt Act, 1944:The petitioners challenged the levy of excise duty on MNPT under Item 14D, arguing that MNPT is not liable for duty as it is not used by itself in any dyeing process. The authorities, however, held that MNPT is capable of being used in a dyeing process and thus falls under Item 14D, which prescribes a 25% ad valorem duty on synthetic organic dyestuffs and synthetic organic derivatives used in any dyeing process.2. Predominant Use of MNPT in the Dyeing Process:The petitioners contended that MNPT is predominantly used in the manufacture of pigments, not in dyeing processes. They argued that the term 'used' in Item 14D should mean predominantly used, not merely capable of being used. The revisional authority rejected this contention, stating that any synthetic organic derivative used in any dyeing process attracts excise duty under Item 14D, irrespective of the extent of its use in dyeing.The court agreed with the petitioners, citing the Supreme Court judgment in M/s. Annapurna Carbon Industries v. State of Andhra Pradesh, which linked the taxable object with its general or ordinary use. The court held that the word 'used' in Item 14D means substantially or commonly used, not rarely or occasionally used.3. Excise Duty Applicability on MNPT Used Within the Factory:The petitioners argued that no excise duty is payable on MNPT used within their factory for manufacturing pigments, as duty is payable only on products removed from the factory. The revisional authority held that Rule 9, read with Rule 49 of the Central Excise Rules, requires duty payment on goods removed in or outside the place of manufacture.The court found that the revisional authority misinterpreted Rule 9 and Rule 49. It held that Rule 9 does not make an article liable to excise duty if it is removed within the place of manufacture. The court directed the Collector of Central Excise to reconsider this issue in light of Chapter VII-A of the Central Excise Rules.4. Maintainability of the Petition under Article 226 of the Constitution:The respondents argued that the petition is not maintainable as there is no error of jurisdiction and the petitioners have not exhausted alternative remedies. The court rejected this objection, stating that the High Court has jurisdiction under Article 226 to examine the legality of an order passed without jurisdiction. The court also held that the rule of exhaustion of alternative remedies is inapplicable in this case, as the authorities are not expected to take a different view for subsequent periods.5. Refund of Excise Duty Paid by the Petitioners:The petitioners sought a writ of mandamus for the refund of excise duty paid from 8th August 1968 to 31st December 1972. The court held that if the initial assessment is found erroneous, the petitioners are entitled to a refund. The court stated that the petition is not intended to circumvent the law of limitation, and the petitioners can file a suit for refund within three years from the decision.Conclusion:The court partially allowed the petition, making the rule absolute in terms of clause (a). It remanded the case to the Collector of Central Excise, Poona, to:(a) Determine whether MNPT is commonly or normally used in the dyeing process and decide its tax liability under Item 14D.(b) Consider the applicability of Chapter VII-A of the Central Excise Rules regarding MNPT used within the factory.The court directed both parties to bear their respective costs.