Delhi High Court
Khan And Sirohi Steel Rolling Mills ... vs Union Of India And Others on 1 January, 1800
ORDER
B.N. Kirpal
1. The petitioner's rolling mill was engaged in the manufacture of bars and rods, falling under Central Excise Tariff, Item No. 26AA, sub - item (ia). The ram material for manufacturing these bars and roads which was being used by the petitioner was steel ingots purchased against gate passes from licensed electric furnaces.
2. In terms of Rule 173B, the petitioner filed a classification list dated 15the February, 1973. The said classification list was not returned to the petitioner. It appears that on 9th November, 1973 a show cause notice was issued to the petitioner asking it to explain as to why a basic duty of Rs. 1,27,117,72 plus Rs. 88,839.16 AED and RD be not recovered under rule 10 of the Central Excise Rules on account of non - levy of duty between November, 1972 and September, 1973; by letter dated 14th November, 1973 the petitioner was also informed that all future clearances of the products would be chargeable to duty and f any product was cleared without a payment of excise duty, the same would be liable to seizure.
3. The petitioner filed its reply and also made a representation against the imposition of excise duty. By order dated 29th November, 1973, the Assistant Collector of Central Excise, Merit did not accept the representation. The petitioner then filed an appeal to the appellate Collector of Central Excise.
4. By an order dated 4th May, 1974 the said appeal was dismissed. No further proceedings were taken by the petitioner under the Act. The petitioner, however, has challenged the decision of imposition of excise duty by filing the present petition under Article 226 of the Constitution.
5. The question which is involved in this case pertains to the correct interpretation of the notifications whereby exemption is granted fro levy of excise duty.
6. The petitioner is seeking the benefit of the exemption by virtue of Notification No. 206 of 1963 dated 30th November, 1963 which was subsequently amended by Notification No. 123 of 1965, dated 14th August, 1965. The unamended notification read as follows:-
"(I) In exercise of the powers conferred by sub - rule (1) of the Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in Ministry of Finance (Department of Revenue) No. 131/62 - Central Excise, dated the 13th June 1962, the Central Government hereby exempts Iron and Steel Products [Falling under sub - item (ia) of Item No. 26AA of the First Schedule to the Central Excise and Salt Act, 1944 (1 of 1944) made from any of the following material or a combination thereof namely:-
(I) Fresh unused re-rollable scrap on which the appropriate amount of duty of excise has already bee paid. (II) Semi - finished steel including blooms, billets, slabs, sheet bars, tin bars and hoc bars, on which the appropriate amount of duty of excise has already been paid. (III) Oil and used re-rollable scrap, from the whole of the duty of excise livable on such products. (2) This notification shall come into force on the first day of December, 1963."
By virtue of notification dated 14th August, 1965 after Item (III) of the notification dated 30th November, 1963 another item being Item No. (IV) was inserted. This was in the following terms:-
"(IV) Ingots, on which the appropriate amount of duty of Excise has already been paid, cut or broken (but not rolled) in any shape resembling the shape of any of the products referred to in sub - item (I) of the said Item NO. 26AA."
As a result of the amendment made on 14th August, 1965 excise duty would be exempt on iron and steel products falling under sub - item (ia) of Item 26AA, if its was made from any of the material or combination thereof mentioned in Item (I) to (IV).
8. It is not disputed that the material which has been manufactured by the petitioner, namely, bars and rods is one which falls under sub - item (ia) of Item 26AA. The only question which arises for considerations as to whether the ram material which is used by the petitioner for the manufacture of its end product is one which is covered by Item (IV) of the said notification.
9. It is not disputed that the end product is manufactured by the petitioner from ingots. It is also an admitted case that the ingots which are used by the petitioner are not cut or broken into any shape resembling the shape of any of the products mentioned in sub - item (ia) of Item 26AA prior to its being used in the manufacture by the petitioner. The reasons for this is that the ingots which are used by the petitioner have, organelle, for this is that the ingots which are used by the petitioner have, originally, the shape of the products falling under sub - item (ia) of Item 26AA and those ingots did not require to be cut or broken into those shapes.
10. According to the respondents in order to get the benefit of this notification, it is necessary that the ingots must be cut or broken into the shape before they are sued in the manufacture of bars and rods. As the Petitioner was not breaking or cutting them into the s said shape before using them in manufacture, the Petitioner was not entitled to the exemption claimed by it. This aspect has been dealt with by the Assistant Collector in following words:-
"Ingots which are manufactured in steel plants are rectangular in cross section having parallel sides and when these are cut into pieces either horizontally or vertically or both, resemble the shape of Semi as maintained in sub - item (ia) of the above item. Accordingly they are entitled to the benefit of the exemption from payment of duty leviable under sub - item (i) of Item No. 266AA of the Central Excise Tariff under Notification No. 206/63, dated 30 - 11 - 1963.
As against that the ingots manufactured in Mini steel plants are much smaller in size and have a tapering shape and at the time of their casting they resemble billets or bloom falling under sub - item (1) of Item No. 26AA of Central Excise Tariff, Accordingly pieces cut and broken out of such ingots cannot resemble the shape of Semi falling under the aforesaid sub - item (1) of the Item No. 26AA. It may as well be mentioned here that ingots manufactured, in steel plants do not by themselves resemble any of the shapes referred to in sub - item (1) of Item No. 26AA i.e. such as slabs,blooms, billets etc. and acquire resemblance to such shape only after being cut or broken (but not rolled) but ingots manufactured in Arc Furnaces when case resemble the shape of Semi referred to in sub - item No. (1) and which therefore do not necessarily have to be cut to impart such resemblance."
It appears to me that the aforesaid reasoning of the Assistant Collector cannot be assailed. The contention of Mr. Bhatia that the use of any ingots in the manufacture of bars and road would entitled the Petitioner to exemption cannot be accepted. The plain reading of Item (IV) shows that the raw material must be ingots and secondly those ingots have to be cut or broken into the shape resembling the shape of any of the products mention in sub - Item (1) of the item 26AA. Admittedly the ingots used by the Petitioner are not cut or broken into the said shapes because the ingots themselves have that type of shape. The benefit of the notifications restricted and it can be availed of only if both the conditions of Item (IV) are satisfied.
11. It was then contended by MR. Bhatia, the prior to the issuance of the notification dated 14the August, 1965 the should have been given an opportunity of being heard. It is not possible for me to accept this contention. The intention of issuing the notification dated 14th August, 1965 was to give further benefit to the manufacturers of products referred to in sub - item (1) of the Item No. 26 - AA. Previously this benefit was available only for the goods specified in sub - item (ia) manufactured out of the raw material mentioned in Items (1) to (III). To this Item (IV) was added by excise notification dated 14th August, 1965. Before granting this extra benefit the question of giving any opportunity to be heard does not arise. It is not as if the impugned notification took away any right. On the contrary the said notification gave additional benefit. Principles of natural justice require an opportunity of hearing being granted before any action prejudicial to the interest of the Petitioner is taken. IN the present case, on the country, the impugned notification sought to grant an extra benefit.
12. No other contention has been raised before me.
13. For the aforesaid reasons, the writ petition is dismissed. The parties shall, however, bear their own costs.