TaxTMI 
TaxTMI 
1976 (5) TMI 98
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....;     *             *              * 7.  On 24th March, 1975 the petitioner moved this application under Article 226 of the Constitution and obtained a rule nisi. It was recorded by this court on 7th May, 1975 that without prejudice to the rights and contentions of the petitioner that the rough-rolled zinc used for punching zinc calots was not sheets or strips within the meaning of Tariff Item 26B(2) the petitioner volunteered to clear in future rough-rolled zinc used for punching calots upon payment of an amount equivalent to the duty alleged to be leviable on such rough-rolled zinc. It was further ordered that all future clearances of rough-rolled zinc shall be allowed upon payment in monthly return in R.T. Form 12 and such payment as aforesaid would be subject to the result of the main rule and in the event of the petitioner succeeding in the main rule nisi the respondents to the rule would refund such amount so paid as might be held not payable as duty in law. In this application under Article 226 of the Constituti....
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....7) Union of India v. Delhi Cloth and General Mills - A.I.R. 1963 S.C. 791 = 1977 E.L.T. (J 199). (8) Shinde Brothers v. Deputy Commissioner, Raichur & Ors. - A.I.R. 1967 S.C. 1512. (9) S.B. Sugar Mills v. Union of India - A.I.R. 1968 S.C. 922. 9. The duty is on manufacture or production of goods. Manufacture implies a change but every change in the raw material is not manufacture eligible to duty. To be manufacture eligible to duty there must be such transformation that a new and different article which can ordinarily come to the market to be bought and sold and known to the market having a distinctive name, character and use must emerge. Furthermore, in order to be dutiable as one of the items mentioned in the First Schedule to the Act the transformation must result in making the article as one as mentioned in the First Schedule. The specific question, is, whether the operation carried on by the petitioner as indicated before to bring into being the rough-rolled zinc can be considered to be manufacture of sheets or strips in terms of item 26B(2) of the First Schedule. The fact that these are used by the petitioner for production of end product and not sold by it is irrelev....
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.... It could not be said, according to the Supreme Court, that only trimmed circles could be considered as circles and as finished product. Even uncut circles were circles as envisaged by the item. The rolling of billets into circles was a process in the course of completion of a manufactured product as contemplated by section 2(f). There was, in that case, no dispute that rolled billets of copper alloys were circles in some form or other and in different sizes. The contention was that uncut circles could not be held to be circles as mentioned in the item. The Supreme Court found that the contention was unacceptable in view of the description of the goods in Item 26A of the First Schedule to the Act. The Supreme Court found on evidence that uncut circles were certainly one form of circles. The Supreme Court was further of the opinion that the contention that uncut circles could not form one form of circles not be accepted because in that case there was no evidence that in commercial community uncut circles were not known as circles. Therefore if these were circles known as circles in the commercial community even though these were uncut then in view of the fact that the item which was....
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....ills Ltd. v. Union of India & Ors. reported in (1968) 3 S.C.R., p. 211, Minerals and Metal Trading Corporation of India Ltd. v. Union of India & Ors. (1973) 1 S.C.R., p. 997. The same view was also reiterated by The Supreme Court in Civil Appeal No. 1446 of 1974, Dunlop Ltd. v. Union of India and Civil Appeal No. 2476 of 1972, Madras Rubber Factory v. Union of India (judgment delivered on 6-10-1975). It follows, therefore, that in interpreting the meaning of the words in fiscal statute where the words are not defined the acceptance of the words by trade and their popular meaning should be the guide and should be taken as the meaning. It is, therefore, necessary to consider whether the respondent authorities have proceeded on the correct basis for determining whether the rough-rolled zinc produced by the petitioners in the manner as described before can be called either sheets or strips If such rough-rolled zinc can be considered to be sheets or strips then in whatever forms these are and in whatever sizes these will be exigible to duty. Counsel for the respondents contended before me that the test of being known in the market as indicated by the Supreme Court in the case of Union o....
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....r. reported in 1973 (2) Taxation Law Reports, p. 1863. *          *            *                * 13. The Standards Institution lays down specification for most of the commodities and manufactured articles which figure in our trade and commerce. Therefore, where a standard specification for an item is indicated in the Indian Standard Specification as in this case, it is evident that rolled zinc sheets and strips are known as such and there are such commodities as sheets and strips. But it was contended on behalf of the petitioner that the specification laid down by the Indian Standard Specification was not the specification in respect of the goods rough-rolled zinc prepared by the petitioner. Such specifications are as follows :- *          *            *                * This specification in my opi....
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.... duty under Tariff Item No. 26B(2). He said on the evidence before the respondent authorities as well as before me submitted that I should hold that the article is not dutiable. As I have mentioned before, the true test is to find out whether these items are known in the market as such. Even if these do not conform to the specifications of l.S.S., the l.S. Specification is a piece of evidence and it is necessary to consider on evidence whether articles not according to the specification are known in the market goods as indicated in Tariff Item 26B(2). Certain evidence have been produced after the enquiry and relied on by the respondents as mentioned in Annexure 'H' to the affidavit-in-opposition. Having regard to the state of affairs. in my opinion, it will not be proper for this Court at this stage to determine whether this article is exigible to duty. The proper order, therefore, would to set aside the order of the Appellate Collector and direct him to determine the question afresh in accordance with law and in accordance with the principles indicated in this judgment after taking into consideration all relevant and material evidence. 19. There is another aspect of the matt....
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.... under rule 8 granting exemption. When certain exempted items have been used in the further process then if duty is imposed again that may be an occasion for repetitive duty. In such a case, the proper remedy of the petitioner would be to move the government to issue notification exempting the petitioner from the burden of duty in respect of scraps. But in my opinion it cannot be said that there was any repetitive duty not permissible under the law in the instant case. 20. My attention was drawn to several other decisions on this aspect viz. the decision of mine in the case of Photo Optical Company Pvt. Ltd. v . Union of India & Ors. - 1976 Taxation Law Reports, p. 1430; the decision of the Bombay High Court in Misc. Petition No. 401 of 1963, Cosmos India Rubber Works Private limited v. G. Koruthu Collector of Central Excise & Two others; the decision of the Delhi High Court in Civil Writ No. 357 of 1970, Caltex oil refining (India) Ltd. v. The Union of India & others and the decision of the Gujarat High Court in First Appeal No. 128 of 1972 with Special Civil Application No. 97 of 1972 (Under Articles 226 and 227 of the Constitution of India) and First Appeal No. 970 of 1973....
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.... on such goods on written demand made by proper officer and also would be liable to penalty which may extend to ₹ 2,000/- and also liable to confiscation. Therefore, if a manufacturer has removed excisable goods in contravention of sub-rule (1), then he becomes liable to pay duty on demand and he exposes himself to penalty and to confiscation. Sub-rule (1) of Rule 9 imposes an obligation that excisable goods shall not be removed from any place where these are produced, cured, or manufactured or a place appurtaining thereto. l need not concern myself with the proviso to the said sub-rule. The scope and effect of these rules have been the subject matter of judicial interpretation. *          *            *                * 24. In the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay & Others v. The Elphinstone Spinning and Weaving Mills Co. Ltd. reported in A.l.R. 1971 Supreme Court p. 2039, the Supreme Court held that in case of ambiguity word should not be construe....
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....e notice under Rule 9(2)." 25. As mentioned hereinbefore the Supreme Court noted that Rule 9 (2) applied only to cases where there had been evasion from payment of duty and this the Supreme Court found to be the decision of the Supreme Court in the case of J.K. Steel Limited v. Union of India reported in A.I.R. 1970 S.C., p. 1173 as the Supreme Court observed that in order to attract sub-rule (2)of Rule 9 the goods should have been removed in contravention of sub-rule (1). That condition perhaps would be fulfilled in the instant case if it is held that the rough-rolled zincs out of which zinc calots are prepared were exigible to duty under tariff Item 26B(2) because admittedly on this there has been no payment of duty. But the Supreme Court observed, further, that in order to attract sub-rule (2) the goods must be removed clandestinely and without assessment. Therefore it was necessary to attract the applicability of the said Rule, not only that the goods exigible to duty had escaped duty but such goods must have been removed clandestinely. Thus the Supreme Court was induced to hold because the consequence of non-ompliance with Rule 9(1) would be not only to attract the provi....
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....llector in this behalf, whether for consumption, export, or Manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid. If rough rolled zincs out of zinc calots are punched are excisable goods then they admittedly have been removed for consumption without payment of duty. To that extent Rule 9(1) has been violated. But the question is, have these goods been removed clandestinely ? These goods were produced at the places as per site plan approved by the Excise authorities. Detailed procedures both under the "Self-removal procedure as well as the "physical control procedure" which enjoined specific and detailed duties on the part of the Excise authorities have been set out. It is not the cass that the goods were not manufactured or prepared at the places as indicated in the site plan approved by the Excise authorities. In these circumstances, can it be said that the goods have been removed clandestinely ? 26. Rule 9(2) does not require any notice to show cause to be given but in the instant case such a notice was given dated the 21st November, 1974 which has been set out hereinbefore. That of course, does not affect the....
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.... it has become absolutely unreal. The concept that everybody is presumed to know the law was itself of doubtful validity originally. Even in ancient times when laws were few the maxim at best might have represented half truth. But now with so many complex laws with numerous bye-laws etc. it would be perhaps more nearer to truth and reality to say that nobody knows the laws. But even if we adhere to that legal concept that everybody is presumed to know the law must also presume that the excise authorities are presumed also to know the law; in that background of unreal presumption it cannot be said that the goods in question were removed secretly or in clandestine manner. In view of the detailed site plan and process flow chart submitted by the petitioner, there are no material in this case to come to the conclusion that the goods were removed clandestinely. *        *        *         * 30. In the instant case, in my opinion, it is necessary to consider whether Rule 10 or Rule 10A will apply. In order to come within Rule 10A, as has been held by the Sup....
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....uent periods have paid such duty under the circumstances mentioned hereinbefore. The petitioner has given a chart of the amount of duty paid on zinc calots for the period from May, 1961 to February 1975 in Annexure `U' to the petition. The amount claimed by the petitioner comes to ₹ 2,24,16,981.00. In respect of the period upto December, 1973 assessments have been made and even after December, 1973, the petitioner has paid duty on zinc calots under protest. The question, is, when it has been held by the Appellate Collector in the order referred to hereinbefore on the 3rd of January, 1975, that zinc calots are not assessable to duty, whether in those circumstances the petitioner is entitled to refund of excise duty paid. If so, can that claim for refund be enforceable in an application under Article 226 of the Constitution. The petitioner has based its claim for refund on the fact that the petitioner paid the said duty on a mistaken basis that such duty was payable although the petitioner was not liable in law or in fact to pay such duties. The petitioner, further, stated that the petitioner discovered the said mistake when the petitioner received the order of the Appellate Co....
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....subject to questions of estoppel, waiver, limitation and the like while for a suit for refund of money paid under a mistake, the period of limitation was three years from the date of discovery of the mistake, for claiming the same relief by way of a petition under Article 226 of the Constitution, the filing of such a petition within a period of three years cannot be said to be unreasonable delay. Having regard to the facts and circumstances of the case, the court might consider the delay unreasonable even if it was less than the period of limitation prescribed for a civil action for the remedy of refund. But delay must always be held to he unreasonable if the petition was filed beyond three years, Among the facts and circumstances of the case it would be relevant for holding whether a petitioner was entitled to such refund or not, the fact that the assessment order was not void but was merely erroneous in law or on the facts would be a relevant circumstance. If the assessment order cannot be questioned in a civil court, the refund of tax also could not be ordered by a civil court. That being so even in a petition under Article 226 of the Constitution there cannot be an order for re....
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.... There is another aspect of the matter. I have directed that Appellate Collector would re-determine the question whether zinc sheets and strips are exigible to duty. If zinc sheets and strips are exigible to duty then for the period the zinc sheets and strips have not borne duty a claim for set off against the claim for refund of the money payable by the petitioner under section 11 of the Act would arise because section 11 of the Act povides that in respect of any duty or any other sums payable to the Central Government under any provisions of the Act or the rules made thereunder, the officer empowered by the Central Board of Revenue to levy such duty may deduct the amount so payable from any money owing to the person from whom such money may be recoverable. If that is the position, then until this question is determined it is premature at this stage to ask for refund. For the aforesaid reason in my opinion, the approporiate orders would be to direct as follows :- (1) The order dated 3rd January, 1975 passed by the Appellate Collector in so far as it held that rough rolled zincs out of which zinc calots are punched are assessable to Central Excise Duty is set aside and he wil....