2003 (9) TMI 98 - HC - Central Excise

Circular Quashed for Overstepping Authority in Reclassifying Fusible Interlining Cloth; Violated Excise Act & Constitution.

The HC declared Circular No. 433/66/98-CX.6 ultra vires, quashing it for violating Section 37B of the Central Excise Act and constitutional Articles 14, ... Fabric - fusible Interlining cloth - Validity of Circular No. 433/66/98-CX.6 - Circular violates the provisions contained in Section 37B of the Central Excise Act ('the Excise Act'), Note 2 of Chapter 59 of the Central Excise Tariff Act ('the Tariff Act') and Articles 14, 19 and 265 of the Constitution of India - HELD THAT:- A bare perusal of the aforesaid provisions makes it clear that but for the Chapter Note 2(c), which was introduced under the Finance Act, 1989, such fusible interlining would be coming within Chapters 50 to 55 and only by virtue of introduction of Chapter Note 2(c) of Chapter 59 such fusible interlining came within the scope of Chapter 59.03. Once such Chapter Note 2(c) was omitted under the Finance Act, 1995 it is obvious that the position which was available prior to introduction of such Chapter Note 2(c) revived. In such background, issuance of Circular would be clearly against the statutory provisions. In other words, the Chapter Note 2(c) had been omitted under a statutory provision. The Board by issuing such a circular is trying to re-introduce such Note by insisting that such item should come within Chapter 59.03. It is well settled that by issuing circular u/s 37B of the Excise Act, the Board cannot shut down the quasi judicial power of the Authorities under the Excise Act and the Tariff Act. In such view of the matter, the Circular must be taken to be illegal and ultra vires and is hereby quashed. Since the notice itself was issued on the basis of the circular, it is obvious that such circular is likely to be followed by the concerned Authorities, and therefore, filing of the writ petition cannot be said to be pre-mature and such circular, which is contrary to the provisions of the Finance Act, cannot be sustained. For the aforesaid purpose, the decision of this Court in [1995 (3) TMI 56 - MADRAS HIGH COURT](Madras Bar Association v. CBDT) is applicable. Thus, the writ petition is allowed and the impugned circular is quashed as illegal and ultra vires. There would be no order as to costs. Consequently, WMP. No. 450 of 1999 is closed. Issues involved: The judgment involves the declaration of Circular No. 433/66/98-CX.6 as ultra vires due to violations of Section 37B of the Central Excise Act, Note 2 of Chapter 59 of the Central Excise Tariff Act, and Articles 14, 19, and 265 of the Constitution of India.Issue 1 - Classification of Fusible Interlining Cloth: The petitioner manufactures textile products, including fusible interlining cloth coated with plastic. The circular in question raised doubts on the classification of this cloth under Chapter Heading 59.03 of the Central Excise Tariff Act. The circular attempted to reintroduce a classification that was omitted under the Finance Act, 1995. The petitioner argued that the circular exceeded the Board's power and violated constitutional provisions.Issue 2 - Legality of the Circular: The petitioner contended that the circular issued by the Board was beyond its authority and contravened Section 37B of the Excise Act and Articles 14, 19(1)(g), and 265 of the Constitution. The circular was challenged as having no impact on the adjudicatory process and was sought to be declared illegal and inoperative.Judgment: The High Court held that the circular was illegal and ultra vires, quashing it based on precedents that established the Board cannot impede the quasi-judicial powers of authorities under the Excise Act and the Tariff Act. The Court emphasized that the circular's issuance was against statutory provisions and attempted to reintroduce a classification that had been omitted under the Finance Act, 1995. The Court also rejected the argument that the writ petition was premature, citing previous decisions. As a result, the writ petition was allowed, the circular was quashed, and no costs were awarded.