1. This is a Petition under Art. 226 of the Constitution of India for Writs of Certiorari and Mandamus and for other appropriate writs, directions and orders under Art. 226 for quashing and directing the Respondents, their Officers, Subordinates and Successors to withdraw and cancel a demand for Rs. 52,205.91 ps. dated 8th July, 1969, issued by the Inspector of Central Excise, the order of the Assistant Collector, Central Excise, Bombay-2, dated 13th January, 1970, and Orders passed in appeal and in Revision to the Central Government dated 7th April, 1971, and 31st January, 1973, respectively, whereby a demand on the 1st Petitioners was made for a sum of Rs. 52,205.91 ps. in respect of the duty alleged to be leviable on the Censor Certificate Length of the film attached to the length of the feature film, under the provision of the Central Excises and Salt Act, 1944, and (hereinafter referred to as 'the said Act')
2. The short facts giving rise to this Petition are that the 1st Petitioners a limited company, inter alia own and run a Division known as 'Film Center' and inter alia carry on the business of printing and processing cinematograph films. The 2nd Petitioner is a Director and a share holder of the 1st Petitioners, and a citizen of India. It is the case of the Petitioners that in respect of the cinematograph films, the 1st Petitioners were paying Excise duty prior to 1st April, 1969, under Item No. 37 of the said Act, which reads as under :
* * * * *
3. Under Item No. 37 the Excise authorities did not levy any excise duty upon the Censor Certificate length of the film and the 1st Petitioners also did not recover the same from their customers. It is the case of the 1st Petitioners that the Excise authorities by practice or otherwise did not levy any duty upon such portion of the film which related to the Censor Certificate length and in fact, the film was allowed to be removed from the factory without the levy of such duty and this practice continued for a period of about 10 years.
4. Thereafter it appears that the Central Board of Excise and Customs by its circular letter dated 10th February, 1969, addressed to the Subordinates in the Central Excise, including Respondents Nos. 1 and 2, directed the recovery of excise duty on the length of the feature film manufactured including the length of the film necessary for the purposes of the film copy of the said Censor Certificate. In other words the Censor Certificate length of the film was included in the total length of the film for the purpose of assessment of excise duty under tariff Item No. 37 of the Central Excise Tariff. The reason given for such direction was that no exposed feature film can be exhibited without the certificate issued by the Board of Film Censors and the certificate in question formed an integral part of the whole exposed film and therefore was to be treated as part of the whole exposed film and hence liable to duty under Item No. 37. A copy of this Circular dated 10th February, 1969 has not been annexed either to the Petitioners or to the affidavit in reply to the Petition but Mr. Dalal on behalf of the Respondent has produced the same in Court and is taken on file and exhibited as Exh. 1. In view of this direction by a letter dated 17th April, 1969, the Senior Grade Inspector of the Central Excise informed the 1st Petitioners that excise duty would be charged on the total length of the film including the length of the film used for marking and exhibiting the film copy of the Censor Certificate under Item No. 37 of the First Schedule to the said Act. Thereafter in correspondence with the 1st Petitioners, they were ultimately directed to make payments of the amounts so due. The same was by a letter dated 8th July, 1969, the issued by the said Inspector. In the meanwhile the 1st Petitioners made payment of excise duty in respect of such length of the Censor's certificate without any protest. However, in relation to this demand of 8th July, 1969 the 1st Petitioners objected to make payments. As their objection was overruled the 1st Petitioners preferred an appeal to the 2nd Respondent but the said appeal was rejected by the 2nd Respondent by his order dated 13th January, 1970. Thereafter a further appeal was preferred to the 1st Respondent which was also rejected by an order dated 7th April, 1969, issued by the 1st Respondent. A Revision was then preferred to the 3rd Respondent which was also rejected by an order dated 31st January 1973, and by a letter dated 16th April, 1973, the 5th Respondent called upon the 1st Petitioners to make payment of the said amount of Rs. 52,205.91 ps. It is these orders and letters of demand made by the Respondents against the 1st Petitioners that has been challenged by the Petitioners in this Petition. It may be stated that by a Notification issued by the Central Government the portion of the film viz., Censor Certificate length has been exempted from the levy of duty from 20th February, 1970.
5. Only two grounds of attack have been raised before Court out of the several grounds which have been stated in the Petition. There are that Respondent Nos. 1, 2 and 4 have not exercised their independent mind but have been directed by the directions in the letter dated 10th February, 1969. It is contended that by reason of this direction these Respondents were not in a position to exercise their independent and unfettered mind and were solely guided in their decision by reason of this directive dated 10th February, 1969. It was urged that the powers exercised by these authorities were of quasi-judicial nature and that the power cannot be controlled by the direction issued by the Central Board of Excise and Customs. It was the duty of these authorities to act independently and impartially and as it was their duty to apply their own mind, the orders that they passed were not their own judgment but essentially the judgments of the authority that gave such directions. The second point that was urged on behalf of the Petitioners related to the merits of the levy of duty in respect of the Censor Certificate length of the film. It was argued that the same did not fall within the preview of the said Act and therefore item No. 37 did not apply, it was argued that length of the film was not an 'exercisable goods'. It must be mentioned that neither of these points were taken in the grounds before the authorities who heard this censor were the same urged. But it is argued that when a Petition raises a point of jurisdiction of the authority to levy duty even if the points were not argued before the authorities under the said Act, the Petitioners could urge the same before the Court. On behalf of the Respondents there is no dispute as regards the facts but it is argued by Mr. Dalal on behalf of the Respondents that the directive is on a question of law which the Central Board of Excise and Customs and entitled to issue and it cannot be said to affect the mind of the authorities dealing with the facts of each case. On the merits it was urged that as the length of the film relating to the Censor Certificate was to be affixed to the film and always to be exhibited with it under Rule 36 of the Cinematograph (Censorship) Rules, 1958, it formed an integral part of the exposed film and therefore liable to duty under Item No. 37 of the tariff.
6. In regard to the first contention viz., that the letter dated 10th February, 1969, was a directive by the Board which fettered the powers of the Respondents Nos. 1 and 4 and hence their orders are a nullity. Reliance was placed by Mr. Kapadia for the Petitioners on the decision of the Supreme Court in Oriental Paper Mills v. Union of India, reported in : 1973ECR1(SC) . That was a case arising under the provisions of the same Act, viz., Central Excises and Salt Act, 1944, and a challenge was made to an order of the authorities thereunder made in relation to an assessment of a chargeable item viz., M.G. Poster paper manufactured by the Appellant Company and which fell within one of the items in the First Schedule to the said Act. The main ground of attack related to the order which was admittedly passed by a quasi-judicial authority being illegal on the ground that the authorities were controlled by direction or mandate issued by the Central Board of Excise and Customs and hence no independent application of mind was made by the authorities concerned. Reliance was placed on the following observations of the Court at pages 51, in paragraph 8 :
'If the power exercised by the Collector was a quasi-judicial power - as we hold it to be - that powers cannot be controlled by the directions issued by the Board No authority however high placed can control the decision of a judicial or a quasi-judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are Judge in their own cause, yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be judgments of the authority that gave the directions and which authority had given those judgments without hearing the aggrieved party. The only provision under which the Board can issue directions is rule 233 of the Rules framed under the Act. That rule says that the Board and the Collectors may issue written instructions providing for any supplemental matters arising out of these Rules. Under this rule the only instruction that the Board can issue is that relating to administrative matters otherwise that rule will have to be considered as ultra vires Section 35 of the Act.'
7. It was on the basis of this observation that it was urged that the impugned orders could not be said to be the orders of the authorities who issued them but were in fact and essentially the Judgment and the Order of the authority that issued the directive. Mr. Dalal concedes that if this directive related to a question of fact, undoubtedly the principles of that case must apply. But he contends that the direction by the letter dated 10th February, 1969, relates to a question of law and therefore the direction could not be called in question and could not effect the independent mind of the authority considering the question on the facts of each case. I do not accept this contention of Mr. Dalal. This directive does not give guidance relating to the law simplicitor. It is a mandate of the Board directing inclusion of excisable goods in a particular item of the tariff under the said Act, which is not within the ambit of the Board to give. It can only give directions of an administrative nature as stated by the Supreme Court in the above quoted observations, viz., 'the only instructions the Board can issue is that relating to administrative matters, otherwise that rule will have to be considered as ultra vires section 35 of the Act.' In the present case, it cannot be said that the directions issued in the letter dated 10th February, 1969, are administrative directions. In fact, these directions go to the root of the matter viz., that no discretion is left with the authority to consider the question on the facts of each case. It is a mandatory direction directing to the authorities to include in the total length of the film, the length of the film used for the purpose of the Censor's Certificate and the authorities directed to levy duty under the said Item No. 37. In the affidavit in reply it is admitted that the original demand has been issued in pursuance of this direction. The letter dated 17th April, 1969, annexed as part of Exh. A, (Colly), to the Petition, issued by the Senior Grade Inspector of the Central Excise leaves no doubt on this portion. Relevant portion of the said letter reads as under :
'I have been directed by the higher authorities to inform you, that the Central Board of Excise and Customs, New Delhi, are of the view that the length of the film used for exhibiting the certificate issued by the Central Board of Film Censors should also be included in the total length of the Film in each print of a feature film and short etc. for the purpose of assessment to excise duty under Tariff Item No. 37(II) of the Central Excise Board immediately.'
8. The said letter does not specifically deal with the period with which the Court is concerned in the present Petition but at the same time to re-opening of the assessment has been made by a reason for the said directive. Prior thereto no duty was levied upon the Censor's Certificate length of the film. In the affidavit of K. D. Yennamadi, Assistant Collector of the Central Excise. However, it is stated that the Excise Authorities who considered the correct legal position and accepted the view of the Central Excise Board and Customs as the correct view in law and then passed the necessary orders. I am not inclined to accept this bold statement. In fact the persons who have issued the orders have not even filed an affidavit as to the circumstances under which they passed the respective orders. In any event, I am not inclined to accept this contention in the view of the letter dated 17th April, 1969 referred to above and further that in the ordinary course of events the subordinates would undoubtedly be affected if not bound by the orders issued by their superiors. A quasi-judicial body and an authority which exercises penal powers is bound to act in such a manner that there is no scope left for an aggrieved party to feel that an independent mind was not applied. No doubt, in the present case, although the petitioners were fully aware or of this directive, still they chose not to urge this point before the authorities concerned but in view of the observations of the Supreme Court, in the above mentioned decision in Oriental Paper Mills v. Union of India.
'That apart, we are clearly of the opinion that even if the question of the legality of the directions issued by the Board had not been taken before the authorities under the Act, as that direction completely vitiates the proceedings and makes a mockery of the judicial process, we thank we ought to consider the legality of that direction. For the reasons already mentioned, we hold that direction was invalid and the same has vitiated the proceedings before the Collector as well as the Government.'
9. Such directions not being administrative directions under rule 233 of the rules framed under the Act are invalid directions which the authorities are not entitled to take note of and as the same have been taken note of, the same vitiates the proceedings. If the proceedings are vitiated then the orders issued are without jurisdiction and in that case the Petitioners are entitled to urge this contention in a Petition under Art. 226 of the Constitution. In these circumstances, the impugned orders and the Notices of demand are liable to be quashed upon the ground that Respondent Nos. 1, 2 and 4 have relied upon this directive dated 10th February, 1969. It may be stated that Mr. Dalal argued on behalf of the Respondents that the directions could not bind the Central Government under its Revisional powers and therefore, even assuming that the orders of the authorities other than the Central Government were vitiated by reason of this directive, the order of the Central Government in revision is valid. In my opinion, if as observed by the Supreme Court in the above case, such directions make a mockery of the judicial process and the same are in their inception without jurisdiction, then the final order also must fail.
10. This brings me to the second and last contention of Mr. Kapadia for the Petitioners, that the Censor's Certificate length of the film is not an 'excisable goods' within the meaning of section 2(d) of the said Act, because it is not 'goods'. His argument is that before any excise duty can be leviable the article must be something which can ordinarily come to the market to be bought and sold. In so far as the Censor's Certificate length of the film is concerned it has no market whatsoever because it is neither bought nor sold, the reason being that it is merely an intimation of the fact that a particular film has been passed by the Board of Censors. Mr. Dalal on the other hand, contends that the Censor Certificate length of the film being attached or affixed to the main exposed film, it is an integral part of the main exposed film and when the main exposed film is bought and sold this length of the film viz., Censor Certificate length of the film which is to be affixed to the main film, has also the same value. In order to appreciate the contention of the parties, it is necessary to set out the relevant portion of rule 36 of the Cinematography (Censorship) Rules, 1958 :
'36. Certificates. - (1) A certificate authorising the public exhibition of a film shall be in one of the forms IV or V set out in the Schedule, accordingly as the authorisation is for unrestricted public exhibition or for public exhibition restricted to adults.
(2) The certificate shall be signed for and on behalf of the Board by the Chairman or by a Regional Officer for the Chairman.
(3) The prescribed mark of the Board shall be a film copy of the certificate i.e. a trailer certificate, which shall be affixed to the film and always exhibited with it. The length of the trailer certificate will be as laid down in the following table :'
11. According to Mr. Dalal under sub-clause (3) of rule 36, the prescribed mark of the Board shall be a film copy of the certificate, i.e. a trailer certificate which shall be affixed to the film and always exhibited with it. According to Mr. Dalal, under this Censor Certificate length of the film is and integral part of the main exposed film. He argued that as the statute is mandatory it has to be affixed in all cases and must therefore be treated as part of the main exposed film. In order to appreciate this contention it is necessary to know when excise duty is leviable upon an article under the said Act. For that purpose I may only refer to the Judgment of the Supreme Court in the case of Union of India & Anr. v. Delhi Cloth and Central Mills Co. Ltd. and other allied Appeals reported in : 1973ECR56(SC) . That was a case in which in the process of manufacture of Vanaspati at an intermediate stage another article was alleged to have been produced and which article itself was liable to excise duty viz., refined oil. The excise authorities levied duty upon this refined oil. The question was whether any duty was leviable thereon. In that case, the Supreme Court laid down two broad propositions :
(1) that excise duty is on the 'Manufacture of goods' and not on sale;
(2) in order that excise duty may be leviable the article has to be 'goods' before any excise duty can be levied.
At page 795 of the said Judgment in paragraph 17 the Court observed.
'to become 'goods' an article must be something which can ordinarily come to the market to be bought and sold.'
12. Therefore, the question has to be considered in the light of these two principles viz., whether the Censor Certificate length is a 'manufacture which includes a process and whether thereafter it is 'goods'. Mr. Dalal emphasized and when the Censor Certificate length of the film was printed and processed, it is 'manufactured' and duty was leviable on it. Further it was 'goods' because it could not be removed without the same being affixed to the main exposed film which has a market. On the other hand, Mr. Kapadia on behalf of the Petitioners argued that no doubt that the same was processed and printed and thus manufactured within the meaning of the said Act but it was not 'goods' because it had no market value at all. He argued that affixing the same to the main exposed feature film did not make the said article 'goods' within the meaning of that expression because independently thereof, that is to say, independent of the affixing of the Censor Certificate length of the film to the main exposed feature film, the said main exposed feature film had value. The affixing was by virtue of rule 36 of the Cinematograph (Censorship) Rules, 1958, and was only for the purpose of the same being shown at the time when the picture was exhibited to impress that the feature film was censored.
13. It was argued that it is not necessary for the purpose of sale of the main exposed feature film that it should have affixed to it the Censor Certificate length of the film. Rule 27 of the Cinematograph (Censorship) Rules, 1958, states that after the Regional Officer or the Chairman has affixed has signature to the certificate by prior to the delivery or despatch of the certificate to the applicant, a copy of the film as certified by the Board or the script thereof has to be deposited with the Board by the applicant for the purpose of record. Relying upon this rule it is argued that the main exposed feature film is complete and is in fact shown to the Board of Censors prior to the grant of the certificate and has therefore necessarily a value of its own. The printing and processing of the Censor Certificate length of the film is done independently of the main exposed feature film. Therefore, in my view the manufacture of the Censor Certificate length of the film is complete once the same is printed and processed. Annexing or affixing to this length of the film to the main feature film cannot in my view affect the market value of the main feature film. It has its own independent value and even independently of the Censor Certificate length of the film its value is recognised in market. Censor certificate length of the film is not an article of commerce at all and merely because it is affixed to the main feature film, it cannot be said to be 'goods' and hence cannot be within the purview of 'excisable goods'. Mr. Dalal, however, contend that it become excisable goods at the stage when the main feature film is being removed from the factory. The fallacy in this argument is that it equates the liability of duty on the goods with the calculation of duty at the time of removal from the factory. As observed by the Supreme Court in the aforesaid case of Union of India and another v. Delhi Cloth and General Mills Ltd. and others, reported in : 1973ECR56(SC) , that excise duty is on the manufacture of the goods and not on the sale. The goods are manufactured prior to the removal from the factory and the excise duty is levied as soon as the article is manufactured. Therefore, what has to be considered in each case is, at what stage is the article 'goods' in the sense that it is something which can ordinarily come to the market to be bought and sold. If the same is not an article, which can be bought and sold in the market it is not 'goods' even if the same is manufactured. If therefore, the said Censor Certificate length of the film is not 'goods' then the provisions of the said Act are not attracted. Item No. 37 of the Tariff Act has no application and the Respondents therefore, had no jurisdiction to levy duty and the impugned orders and the demand notices were therefore issued without jurisdiction and must be quashed and set aside.
14. In the result, I allow the Petition and make the rule absolute, in terms of the prayer (a) and (b) of the Petition and set aside and quash the orders dated 13th January, 1970, 7th April, 1971, 31st January, 1973 and the demand notices dated 8th July, 1969 and 16th April, 1973.
Respondents to pay to the Petitioners the costs of the Petition.