Patna High Court
Shri Madhav Mills Private Limited vs Union Of India (Uoi) And Ors. on 23 August, 1984
Equivalent citations: 1985(4)ECC77, 1985(22)ELT747(PAT)
Author: Lalit Mohan Sharma
Bench: Lalit Mohan Sharma
JUDGMENT Lalit Mohan Sharma, J.
1. The engineering unit of the petitioner-company is engaged in manufacturing nuts, bolts, M.S. rivets, etc., and claims that for the purpose of excise duty, mild steel rivets must be deemed to be covered by Tariff Item No. 26AA of the Central Excise Rules, 1944, (sic) framed under the provisions of the Central Excises and Salt Act, 1944. According to the respondents the item is covered by Tariff Item No. 68.
2. If the item is held to be covered by Tariff Item No. 26AA (ia) the petitioner will be entitled to the exemption granted by Notification No. 75/67, dated 20th May, 1967, issued under Rule 8 of the Central Excise Rules, 1944. The result of this writ application, therefore, is dependent on the decision as to which tariff item covers M.S. rivets.
3. The second column of Item No. 26AA(ia) of the Tariff which is said to be applicable according to the petitioner is in the following terms :
"Bars, rods, coils, wires, joists, girders, angles, other than slotted angles, channels other than slotted channels, tees, beams, zeds, trough piling, and all other rolled, forged or extruded shapes and sections, not otherwise specified."
The 68th item is the residuary item applicable, to all other goods not elsewhere specified (but excluding certain goods not relevant to the present case). If Item No. 26AA(ia) be held to cover the goods, Item No. 68 will automatically be not attracted.
4. Initially the petitioner filed a classification list showing rivets (as) falling under the Tariff Item No. 68, but on 5th April, 1978, the petitioner forwarded another classification list as evidenced by Annexures 1, l(a) and l(b) claiming that Tariff Item No. 26AA (ia) is applicable to M.S. rivets and on that basis the petitioner is entitled to exemption by virtue of Notification No. 75/67, dated 20th May, 1967, issued under Rule 8 of the Rules. This classification list was approved by the Assistant Collector, respondent No. 2, in exercise of the powers conferred under Rule 173B(1) and (2) of the Rules. According to the statement made in paragraph 4(d) of the writ application, petitioner, after Assistant Collector's approval, stopped collecting excise duty from the customers. Subsequently, the Assistant Collector, by his order on 18th April, 1979, as contained in Annexure 2, modified his earlier approval by substituting Tariff Item No. 68 instead of Tariff Item No. 26AA (ia). In the last column of Notification No. 75/67 the provision in regard to exemption of duty was stated. The petitioner has by the present writ application prayed for quashing Annexure 2 and the demand, Annexure 3, which followed it and for restoring orders in Annexures l(a) and l(b).
5. According to the case made out in the writ application, M.S. rivets are prepared to predetermined shape by a process of hot pressing known as forging out of duty paid iron rods and thus attract Item No. 26AA. By an application filed later in this case, the petitioner further asserted that the question whether M.S. rivets were covered under Tariff (Item) No. 68 or Tariff Item No. 26AA was raised throughout the country and as different States were not consistent in their stand, the matter was referred to the Central Board of Excise and Customs who after consideration issued an advice being Tariff Advice No. 37/82, dated 13th July, 1982, declaring that the disputed item was covered by Tariff Item No. 26AA(ia).
6. The petitioner has also taken a point of violation of principles of natural justice stating that the impugned Annexure 2 was passed without any opportunity to the petitioner to place his case before the authority concerned.
7. Mr. Ram Balak Mahto, the learned Counsel for the petitioner, contended that the process of manufacturing M.S. rivets is included in "forging" used in Item No. 26AA and the M.S. rivets, therefore, should have been exempted under the aforesaid mentioned notification. He relied on the definition of the technical terms "forging, extrusion and rolling" as given in the Encyclopaedia of Science and Technology, Volume 5 of 1982, and pointed out that the respondents in paragraph 3(a) of the counter-affidavit made the following admission :
"After forging the product is fed into fining machine where a ring shaped portion of its head is removed by punching."
8. The learned Counsel also referred to the Tool Engineers Hand Book and Forging Practice printed by F.L.P. House, Moscow.
9. Great emphasis was laid by Mr. Mahto on the trade advice which is in favour of the petitioner, and on the petitioner's assertion in the writ petition that after the Assistant Collector's approval of the classification list, vide Annexures 1, l(a) and l(b), the petitioner stopped collecting excise duty on the concerned item and contended that it is not possible to do so on the transactions completed in the past. The demand in Annexure 3 read with Annexure 2 has been described by the petitioner's counsel as retrospective demand and has been challenged as ultra vires on this basis also. Lastly, it was suggested that, in any event, the Assistant Collector should have heard the petitioner before issuing Annexure 2 and should have disposed of the petitioner's objection by a speaking order.
10. The learned Standing Counsel, Central Government, raised a preliminary objection that as the petitioner has not availed of the remedy of appeal, the writ application should be dismissed without considering the points urged by the petitioner. In reply, Mr. Mahto argued that the writ application having been admitted in 1979 cannot now be defeated on the ground of alternative remedy being available. He appears to be right. The case was admitted within the period of limitation available to the petitioner for appeal and therefore, in view of the decisions in Govind Saran & Sons v. State of Bihar-1983 PLJ 26, Lowa Tanti v. State of Bihar-1976 BBCJ 1 and Hirday Narain v. Income Tax Officer, Bareilly-AIR 1961 S.C. 33, the writ application cannot be rejected on the ground that the alternative remedy of appeal was available to the petitioner.
11. Mr. Aftab Alam contended that so far as the trade advice was concerned, the same cannot he held to be binding on the assessing authority, as his functions are quasi-judicial in nature. The view of the Central Board of Excise should, therefore, be ignored. Reliance was placed on the decisions in Orient Paper Mills v. Union of India-A1R 1969 S.C. 48 and Orient Paper Mills v. Union of India-1978 A1R 1970 S.C. 1498.
12. On the merits of disputed question, Mr. Alam said that Item No. 26AA referred to fresh identifiable products and not to such products which are definitely identifiable with commercial names and established use. It refers to the first stage of production and in that view Tariff Item No. 26AA is not applicable. On the interpretation of the language in Item No. 26AA, the learned Counsel relied on paragraphs 3 and 5 of the counter-affidavit. The learned Counsel stressed on the statement towards the end of paragraph 3(c) that "the product is fed into fining machine where a ring shaped portion of its head is removed by punching".
13. Chapter VIIA of the Rules deals with removal of excisable goods on determination of duty by producers, manufacturers or private warehouse licensees. Rule 173B directs an assessee to file with the proper officer a list for approval in prescribed form and it is provided further that the officer shall, after making necessary enquiry, approve the list with such modification as may be considered necessary and duty payable on the goods in question intended to be removed shall be determined according to the approved list. As has been stated earlier, the petitioner's classification list as contained in Annexures 1, l(a) and l(b) were duly approved. Sub-rule (5) permits modification in the following terms :
"(5) When the dispute about the rate of duty has been finalised or for any other reasons affecting rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly."
14. The provision has been relied on by Mr. Alam as empowering Assistant Collector to pass order in Annexure 2. Mr Mahto contended that since the rate of duty had already been finalised in favour of the petitioner, it should have been given an opportunity to be heard before it was deprived of the benefit.
15. I agree with Mr. Alam that the power of the assessing authority is quasi-judicial in nature and the trade advice, therefore, cannot be treated as binding on him. The power of review granted by Sub-rules (4) and (5) of Rule 173B, therefore, must also be quasi-judicial. On approval of the petitioner's list earlier by Annexures l(a) and l(b), a valuable right accrued in its favour and the principles of natural justice demand that before the same was withdrawn or modified to the prejudice of the petitioner, it should have been heard. The fact that the petitioner had already acted upon the approval order, and therefore, omitted to collect the additional price from the customers, on account of duty now demanded, further complicates the matter. If the margin of profit is not exhorbitant, a business concern, in order to survive, has to pass on any additional burden to the dealers and this the petitioner could not do in the case. The affidavits filed on behalf of the parties, the agruments addressed by the learned Counsel and the technical books referred to at the bar, indicate that the controversy as to the application of the tariff item requires careful consideration and the right of the petitioner to place its case, therefore, cannot be brushed aside as a mere technicality. I, therefore, hold that the impugned annexures are fit to be set aside and in that view it is not essential to decide the question as to which tariff item is applicable in this case. If the authority concerned so desires, it may issue notice to the petitioner and then after giving it adequate1' opportunity to place its case further orders under Rule 173B (5).
16. For the reasons mentioned above, Annexures 2 and 3 are quashed and the writ application is allowed as indicated above, but in the circumstances with costs.