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R.K.H. Industries and Another Vs. Union of India and Another - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberMisc. Petition No. 2382 of 1979
Judge
Reported in1984(16)ELT40(Bom); [1982]135ITR597a(Bom)
AppellantR.K.H. Industries and Another
RespondentUnion of India and Another
Excerpt:
- - 10 lakhs, and as both these conditions prescribed in the notification dated march 1, 1979 are satisfied, the petitioners are eligible to concession in excise duty and are exempted from licensing control so long as their clearances for home consumption did not exceed 80% of the exemption limit of rs. 4. shri dave, learned counsel appearing on behalf of the petitioner, submitted that the assistant collector was clearly in error in treating m/s......to pay duty on goods as the petitioners are not the manufacturers of fan-guards but m/s. rallis india limited are the manufacturers and the goods cleared on behalf of m/s. rallis india limited would attract duty. the petitioners by their reply dated october 31, 1979 pointed out that the petitioners manufacture only fan-guards for m/s. rallis india limited on job work basis. the petitioners accepted the claim that the raw-materials for manufacture of fan-guards is supplied by m/s. rallis india limited while giving contract on job work basis and pointed out that merely because the materials are supplied by m/s. rallis india limited in respect of the job work given to the petitioners, it cannot be concluded that the manufacturing activity is done by m/s. rallis india limited. in spite of.....
Judgment:

1. The petitioners are a partnership firm and are carrying on business of manufacturing fan-guards for electric fans and supply them to various customers.

2. The petitioners have employed over 30 workers and are not liable for payment of excise duty or to take out any licence because of the exemption available under Rules 8 and 174A of the Central Excise Rules and the notifications issued thereunder from time to time. In March 1979, an Inspector from the Central Excise Department visited the petitioners' factory and directed the petitioners to take out a licence in form L-4. The petitioners entered into correspondence and pointed out that their total clearances does not exceed Rs. 30 lakhs in aggregate, that the face value of the machinery of the petitioners did not exceed Rs. 10 lakhs, and as both these conditions prescribed in the Notification dated March 1, 1979 are satisfied, the petitioners are eligible to concession in excise duty and are exempted from licensing control so long as their clearances for home consumption did not exceed 80% of the exemption limit of Rs. 15 lakhs. After some correspondence, the petitioners were informed by the Assistant Collector of Central Excise by letter dated April 16, 1979 that all the conditions stipulated in Government of India's Notification, dated May 9, 1978 have been fulfilled by the petitioners and, therefore, the petitioners are exempted from taking out licence in form L-4. The Assistant Collector, therefore, stated that the question of granting permission for removal of semi-finished goods for further processing, does not arise.

3. In spite of this decision of the Assistant Collector, another letter dated October 23, 1979 was addressed to the petitioners informing that the petitioners are not eligible to exemption and are liable to pay duty on goods as the petitioners are not the manufacturers of fan-guards but M/s. Rallis India Limited are the manufacturers and the goods cleared on behalf of M/s. Rallis India Limited would attract duty. The petitioners by their reply dated October 31, 1979 pointed out that the petitioners manufacture only fan-guards for M/s. Rallis India Limited on job work basis. The petitioners accepted the claim that the raw-materials for manufacture of fan-guards is supplied by M/s. Rallis India Limited while giving contract on job work basis and pointed out that merely because the materials are supplied by M/s. Rallis India Limited in respect of the job work given to the petitioners, it cannot be concluded that the manufacturing activity is done by M/s. Rallis India Limited. In spite of this clear cut reply, the petitioners were informed by letter dated November 19, 1979 that the exemption granted under the Notification No. 89/79 is not available as M/s. Rallis India Limited are the manufacturers of guards because of their supply of raw-materials and the goods cleared by the petitioners on behalf of M/s. Rallis India Limited would attract duty. The decision of the Assistant Collector communicated by this letter has led to the filing of the present petition under Article 226 of the Constitution of India.

4. Shri Dave, learned counsel appearing on behalf of the petitioner, submitted that the Assistant Collector was clearly in error in treating M/s. Rallis India Limited as manufacturers of fan-guards merely because the raw-material for manufacture of fan-guards was supplied by M/s. Rallis India Limited. Shri Dave submits and, in my judgment, with considerable merit, that the petitioners had acquired Industrial Shed where their factory is situated and the petitioners have employed a staff and are registered as small Scale Industry and they have no connection whatsoever with M/s. Rallis India Limited save and except the said Company gives work on the job work basis to the petitioners for manufacture of fan-guards. It is also clear from the averments made in the petition that the petitioners manufacture fan-guards not only for M/s. Rallis India Limited but also for other customers such as Crompton Greaves, and Nima Private Limited using their own raw-materials. Shri Dave very rightly submits that the mere fact that raw-material for manufacture of fan-guards was supplied by M/s. Rallis India Limited in respect of the order booked by the said Company cannot lead the Assistant Collector to the conclusion that the petitioners are not the manufacturers but M/s. Rallis India Limited are and, therefore, the exemption under notification is not available. The assumption of the Assistant Collector in this regard is entirely unwarranted on the facts and circumstances of the case and the action of the Assistant Collector in compelling the petitioners to take out L-4 licence and pay excise duty is entirely illegal and unsustainable.

5. Accordingly, the petition succeeds and the rule is made absolute in terms of prayers (a) and (b) of the petition. In the circumstances of the case, there will be no order as to costs. The Bank guarantees furnished by the petitioners at the time of interim order passed by this Court to stand discharged.


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