Bombay High Court
Vidarbha Mills Berar Limited, Achalpur vs Collector Of Central Excise, Nagpur And ... on 1 January, 1800
Equivalent citations: 1978(2)ELT45(BOM)
JUDGMENT
1. In this petition under Article 226 of the Constitution of India, the Petitioner prays for a writ, an order or a direction quashing the order, dated 14th September, 1967 passed by the Assistant Collector of Central Exicse, Integrated Divisional Office, Nagpur and the order dated 21st december, 1967 passed by the Collector of Central Excise, Nagpur, in appeal.
2. the petitioner who used to run a Textile Mills at Achalpur by letter dated 10-8-1967 requested respondent No.2, the Assistant Collector of Central Excise, Integrated Divisional Office, Nagpur for permission to clear the stock fo trades samples of cloth packed in eleven bales. It was a case of the petitioner that the samples were taken out for the purpose of going them to the traders free of costs and they were exempt from duty and were etitled to be released from the Mills without imposition of any duties. These bales contained cotton pieces of uniform length of half a metre and that they were so cut for the purpose of bona fide use as a sample and there was no malafide intention on the part of the petitioner to evade payment of duty. It was also the case of the petitioner that those pieces were 'rags' and, fall within the definition of the words "damaged or sub- standard cotton fabrics" and were, therefore, exempt from duty. The inspector made a referece to the Assistant Collector Central Excise, Nagpur, who informed him that the contents of these bales were not the samples because the mills have stopped manufacturing of goods and therefore, these do not seem to be samples and that they were not 'rags'. These cotton pieces were neither damaged nor sub-standard goods and were not exempt from duty and, therefore, the permission to clear the stock of trade samples in those 11 bales without payment of duty was not granted to the petitioner. The petitioner, therefore took up the appeal before the Collector, Central Excise, Nagpur, but that appeal was also dismissed and it these orders that are challenged in this petition.
3. It is not necessary for the purposes of this petition to decide whether these bales contained trade samples as, in our opinion, the second submission made by the petitioner, namely, that the pieces were 'rags' as defined under the Central Excise Rules, 1944, is well founded.
4. Tariff Item No.19 is in respect of "Cotton Fabrics". It prescribes duty payable on the cotton fabrics. Sub-Item No.(1) of Item 19 reads, "Cotton fabrics described therein are exempt from to the payment of the excise duty leviable thereon under the Central Excises and Salt Act. 1944 and sub-item No.(1) (10) of Item 19 is "Damaged or sub- standard cotton fabrics which are classified, as-(a) "Chindies" that is to say, cut piece of cotton fabrics which are 23 centimctres or less in length; (b) 'Rags' that is to say, cut pieces of cotton fabrics whcih are more than 23 centimentres but less than 92 centimetres in length.
5. Rule 96(A) of the Central Excise Rules, 1944, under Heading "E-I Cotton fabrics read as follows:
"In this section
(i) "piece of cotton fabrics" means any running length of cotton fabrics and includes a fabrics comprising an uncut pair of dhoties, sarees, chaddars, bed-sheets, bed-spreads, counterpanes, towels, bathmats and table-cloth and any other item ordinarily sold by the pair;
(ii) "damaged or sub-standard cotton fabrics" include
(a) 'chindies', that is to say, cut pieces of cotton fabrics whcih are (23 centietrers) or less in length, (b) 'rags', that is to say, cut pieces of cotton fabrics whcih are move than (23 centimeters) but less than (92 centimetres in length);
Reading the exepmtion under Item 19(1) of the Tariff, it is clear that the 'rags' which fell within the definition of "damaged or ub-standard cotton fabrics" are special types of 'rags' and not 'rags' as they are understood in common parlance. They need not necessarily be a damaged or sub-standard piece of cotton fabric as is ordinarily understood. Any pieces of cloth manufacutred which is more than 23 centimetres but less than 92 centimetres will fall within the definition of 'rags' under the Heading "damaged or sub-standard cotton fabrics".
6. In this particular case, there is not dispute that the pieces which were packed in 11 bales were each 50 centimetres in lenght. The respondents were, therefore, not right in saying that these were not 'rags' failing within the definition damaged or sub-standard coton fabrics. As stated earlier the pieces of cloth need not be damaged or be sub-standard. In our opinion the petitioner was right in claiming exemption on the ground that the pieces were rags coming within the definition, 'damaged or sub-standard cotton fabrics' under Rule 96A of the Central Excises Rules, 1944. The Respondents were not justified in demanding the duty on the 11 bales. The orders of the Assistant Collector of Central Excise, Integrated Divisional Office, Nagpur and the Collector of Central Excise, Nagpur are quashed. We are told that the petitioner have cleared the goods after paying the duty. If that is so, the duty shall be refunded.
7. In the result, the Rule is made absolute with cost.