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Jasmine Mills Ltd. Vs. A.V. Venkateshwaran and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Application No. 494 of 1971
Judge
Reported in(1977)79BOMLR438; 1976MhLJ400
ActsCentral Excise Rules, 1944 - Rules 9, 10, 10A and 52
AppellantJasmine Mills Ltd.
RespondentA.V. Venkateshwaran and ors.
Appellant AdvocateK.R. Wadhwany, Adv.
Respondent AdvocateH.G. Advani, ;S.B. Sukthankar and ;V.B. Lokur, Advs.
Excerpt:
central excises and salt act (i of 1944) - central excise rules, 1944, rules 9, 10a, 233--decision of central board of revenue that fabrics in which the percentage of cotton is 40 per cent. or more by weight of the total product will be deemed to answer the description in item no. 19 in the first schedule to the central excises and salt act that they are 'partly from cotton' so as to fall in the description of 'cotton fabrics'--whether such decision has the force of a statutory rule--whether the decision was a mere administrative matter for which instructions could be given under rule 233 so as to bind excise authorities exercising quasi-judicial power--delay in filing writ petition whether bar to grant of relief.;except the decision of the central board of revenue, there is no other.....b.m. sapre, j.1. by this writ petition filed under articles 226 and 227 of the constitutions, the petitioners, m/s. jasmine mills, challenged the legality of the two notices of demand nos. 13/67 dated september 13, 1967 and 14/67 dated october 25, 1967 for payment of excise duty made respectively under rule 10-a and rule 9 of the central excise rules, 1944, (hereinafter referred to as 'the rules') framed under the central excises and salt act, 1944 (hereinafter referred to as 'the act') and the order for payment of the sum of rs. 10,371/- in pursuance of the said notices. the demand seems to have been made in the alternative under rule 10-a or rule 9. the few material facts may be stated as follows :--- the petitioners are a private limited concern having their factory at dharavi, bombay.....
Judgment:

B.M. Sapre, J.

1. By this writ petition filed under Articles 226 and 227 of the Constitutions, the petitioners, M/s. Jasmine Mills, challenged the legality of the two Notices of Demand Nos. 13/67 dated September 13, 1967 and 14/67 dated October 25, 1967 for payment of Excise Duty made respectively under Rule 10-A and Rule 9 of the Central Excise Rules, 1944, (hereinafter referred to as 'the Rules') framed under the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') and the order for payment of the sum of Rs. 10,371/- in pursuance of the said notices. The demand seems to have been made in the alternative under Rule 10-A or Rule 9.

The few material facts may be stated as follows :---

The petitioners are a private limited concern having their factory at Dharavi, Bombay 17. They are licensed for the processing of cotton fabrics. They were receiving from outside mill made duty paid grey cotton fabrics of coarse variety, for bleaching and/or dyeing and further processing with Polyvinyl chloride (P.V.C.) plastic material, and the fabric continued to remain as cotton fabric even after the P.V.C. processing. After the initial processes of bleaching and/or dyeing, the petitioners were required to present an application in ABI form under Rule 52 for assessment and payment of duty. The duty so assessed and recovered at the intermediary stage of processing, was adjusted against their balance in their Personal Ledger Account. The goods so processed and assessed and duty paid were taken for further processing within the factory, namely, P.V.C. processing. It is after this P.V.C. processing that the goods were removed from the factory under Rule 50 on a Gate-pass.

We are concerned here with six lots goods so cleared on Gate-Passes bearing Nos. B.M. 3, 4, 7, 8, 12 and 13. These processed goods were allowed to be cleared from the factory after taking a declaration from the petitioners on the Gate-Passes that the goods contained less than 40 per cent cotton. Simultaneously, samples were drawn by the authority concerned from these consignments and sent to the Deputy Chief Chemist for a test report as to the percentage of the cotton contents in the P.V.C. processed goods. This was done as the fabric attracted Excise Duty at the rate of 25 Paise per square metre, if the cotton contents were 40 per cent or more. This is the result of a decision of the Central Board of Revenue which was publicised in the form of Trade Notice No. 65 (MP) Cotton Fabrics/1963 and clarified in the Trade Notice No. 135 (MP) Cotton Fabrics (5)/63. The test reports received from the Deputy Chief Chemist in respect of the samples drawn from the six lots cleared under the Gate-Passes revealed that the cotton contents of the P.V.C. processed goods were 40 per cent and above. The petitioners were, therefore, served with Demand Notice No. 13/67 dated September 13, 1967 under Rule 10-A, which reads as under:

'Notice of demand for duty under Rule 10-A.Take notice that on behalf of Central Govt. I hereby demand payment by you of the sum of Rs. 10, 371/- Rupees (Ten thousand, three hundred seventy-one only) within 10 days from the date hereof.

Particulars of demand

P.V.C. manufactured under lots Nos. B.M. 3, 4, 7, 8, 12 and 13 was found to contain % of cotton in excess of 40% and, therefore, liable to pay processing charges at 0.25 paise per sq. meter on 41484 sq. metres, vide notification No. 29/66 S. No. 5(b).

S/d-

Inspector of C. Excise

Jasmine Mills Pvt. Ltd.,

Dharavi, Bombay 17 D. D.'

It appears that the Inspector of Central Excise (respondent No. 4 revised his demand and a fresh Demand Notice No. 14/67 dated October 25, 1967 under Rule 9 was served on the petitioners and it is in these word :---

'Notice of Miscellaneous Demand for payment of duty :

(Rule 9 of the Central Excise Rules, 1944)

To

M/s Jasmine Mills Private Ltd.,

Dharavi, Bombay-17

Take notice that on behalf of the Central Government, I hereby demand under Rule 9 of the Central Excise Rule 1944, payment by you of the sum of Rs. 10,371/- (Rupees Ten Thousand, three hundred and seventy-one only) within ten days from the date hereof.

Particulars of demand

P.V.C. manufactured under Lots Nos. 3, 4, 7, 8, 12 and 13 was found to contain percentage of cotton in excess of 40% and therefore liable to pay processing charges at the rate Rs. 0.25 per square meter on 41484 square, vide notification No. 29/66 section No.

Sd/-

Inspector of Central Excise,

Jasmine Mills Pvt. Ltd.

Dharavi, Bombay 17. DD.'

The petitioners made a representation to the Assistant Collector of Central Excise, Bombay (respondent No. 3 against the first Demand Notice No. 13/67 dated September 13, 1977. They also made a representation to the same authority against the second Demand Notice No. 14/67 dated October 25, 1967. Respondent No. 3 however, took into consideration only the second Demand Notice and by his order dated April 8, 1968, he confirmed the demand made by respondent No. 4. Against that order, the petitioners filed an appeal before the Collector of Central Excise, Bombay (respondent No. 2). Respondent No. 2 dismissed the appeal on January 13, 1970 and confirmed the order of respondent No. 3. Against the order of the Collector of Central Excise, Bombay, the petitioners submitted an application in revision to the Joint Secretary to the Government of India in the Ministry of Finance (Department of Revenue and Insurance), New Delhi (respondent No. 1 as representing the Central Government. He also dismissed the revision application on August 29, 1970. All these authorities held that as the cotton content of the P.V.C. cloth cleared exceeded 40% it was liable to duty at the rate of 25 paise per square metre and for this, they obviously relied upon the decision of the Central Board of Revenue publicised in the two Trade Notices already referred to. The petitioners have paid under protest the sum of Rs. 10,371/- claimed in the two Demand Notices and have now filed this writ petition on February 18,1971, challenging the legality of the two Notices of Demand, and for setting aside the orders of the various authorities upholding the legality of the Demand Notices and for the refund of the amount which has been paid under protest.

It may be stated at the outset that the petitioners have claimed reliefs, inter alia, under Articles 14 and 19(1)(f) and (g) of the Constitution of India. Mr. Wadhwany for the petitioners made a statement at the Bar that the petitioners give up the reliefs sought under Articles 14 and 19(1)(f) and (g) under paragraphs 10 on page 12, 18(C) on page 25 and the first part of paragraph 26(a), the last mentioned paragraph containing the prayer, 'That if may be declared that the said Rule 10-A is null and void and of no effect' (age 27), as also the portions in paragraph 16 and 18(F) relating to fundamental rights claimed under Article 14 and 19(1)(f) and (g) of the Constitution. Those reliefs naturally will not, therefore, be the subject-matter of this judgment.

Although the petitioners have raised some other contentions also before us, their main contention, which, in my opinion, is sufficient to dispose of this petition, is as follows : Section 2(d) of the Act defines 'excisable goods' as meaning goods specified in the First Schedule as being subject to a duty of excise and including salt. Section 3(1) of the Act provides that there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable good other than salt which are produced or manufactured in India and a duty on salt manufactured in or imported by, land into, any part of India as, and at the rates set forth is the First Schedule. Item No. 19 in the First Schedule describes 'cotton fabrics'. The material portion from this item is as under :---

----------------------------------------------------------------------------

'Item No. Description of goods Rate of duty

(1) (2) (3)

----------------------------------------------------------------------------

19. Cotton Fabrics-

'Cotton fabrics' mean all variety of

fabrics manufactured either wholly

or partly from cotton and include

dhoties, sarees, chadars, bed-sheets, bed

spreads, counter-panes and table-

cloth, but do not include any such fabric---

(a) If it contains 40 per cent, or

more by weight of wool;

(b) If it contains 40 per cent, or

more by weight of silk; or

(c) if it contains 60 per cent, or

more by weight of rayon or artificial silk; Sixty naye paise

(1) Cotton fabrics, superfine- per square metre.

that is to say, fabrics in which the

average count yarn is 48 or more. Sixty naye paise

(2) Cotton fabrics, fine- per square metre.

that is to say, fabrics in

which the average count of

yarn is 35s or more but is

less than 48s. Sixty naye paise

(3) Cotton fabrics, medium- per square metre.

that is to say, fabrics in

which the average count of

yarn is 17s or more but is

less than 35s.

(4) Cotton fabrics, coarse- Forty naye paise

that is to say, fabrics in per square meter

which the average count of

yarn is less than 17s.

(5) Cotton fabrics, not otherwise Sixty naye paise

specified. per square meter

----------------------------------------------------------------------------------

'Cotton fabrics' thus means all varieties of fabrics manufactured either wholly or partly from cotton, etc., But there is no indication in Item No. 19 as to how much percentage of cotton has to go into the fabric to satisfy the requirement of it being 'Partly from cotton' so as to make it a 'cotton fabric' section 37 of the Act gives power to the Central Government to make rules. In exercise of this power, the Central Government has framed the central Excise Rules, 1944. Rule 8 of the Rule provides :

'8. Power to authorise exemption from duty in special case---(1) The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods from the whole or any part of duty leviable on such goods.

(2) The Central Board of Revenue may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature, any excisable goods.'

Notification No. 29/66 dated March 1, 1966 on which the two Demand Notices are based, as can be seen from those Notices, was issued ' exempting cotton fabrics' falling under Item No. 19 of 'the First Schedule to the Central Excises and Salt Act, 1944 (I of 1944) and specified in column (2) of the Table hereto annexed from so much of the duty as is in excess of the duty specified in the corresponding entries in column (3) thereof', provided that if the duty has already been paid at the rate applicable to the varieties specified in column (2), the fabrics specified in column (3) shall be exempt from so much duty as is in excess of the duty specified in the corresponding entry in column (4).

The material items from this Notification are these :

'Sl. No. Variety of fabrics Variety of fabrics at the

Duty on entry into the time of clearance from the

factory. factory on payment of duty.

(1) (2) (3) (4)

Paise Per sq. meter.

1 (b) Gray (Medium B/

Bleached or/and dyed or/

Coarse). and printed. 5.00

3 (b) Grey (Medium B/

Processed in any other man- Coarse).

ner including shrink-proofed

and/or organdie processed. 30.00

3 (b) Bleached or/and

Processed in any other man-

dyed or/and printed

ner including shrink-proofed

(Medium B/Coarse).

and/or organdie processed. 25.00'

As already noted, the two Demand Notices are based on this Notification, that is, Notification No. 29/66 dated March 1, 1966, on the ground that the product is 'cotton fabrics' and falls under the item at serial No. 5(b). But it has already been noted from Item No. 19 of the First Schedule to the Act that 'cotton Fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and it has not been stated in Item No. 19 as to how much percentage of cotton has to go into the fabric so as to mean that it is made 'partly from cotton' and consequently, it will fall under the item 'cotton fabrics'. The two Notices of Demand mention that the product is 'cotton fabrics', because it contains cotton in excess of 40% and, therefore, it falls under Item No. 5(b). of the Notification. Now, this criteria for determining that a fabric is 'partly from cotton' because it contains cotton in excess of 40% and thus satisfied the description of 'cotton fabrics' in Item No. 19 has no statutory sanction. All the three authorities, namely, respondent No. 3 respondent No. 2 and respondent No. 1 who were exercising a quasi judicial power in determining the legality of the two Demand Notices, had relied upon the decision of the Central Board of Revenue Publicised as Trade Notice No. 65 (MF) Cotton Fabrics 1963 and further clarified in its subsequent decision publicised as Trade Notice No. 135 (MP) Cotton Fabrics (5)/63. The material portion is to be found in Clause (d) of paragraph 1 of the First Trade Notice and it is as follows :---

'(d) It has also been tentatively decided that in the case of rubber shed or elasticised textiles, if the percentage of textiles is less than 40% by weight of the total product such products will be termed as products made of 'rubber' or 'plastics' as the case may be, and assessed accordingly. But where the percentage of cotton or other textile fabrics is 40% or more by weight of the total, such goods will be classified as processed fabrics, e.g., cotton fabrics, rubberised or plastic treated, as the case may be, and subjected to the appropriate processing duty.'

The question that has been raised before us, therefore, is whether there is any statutory sanction for determining duty on the products on the ground that they fall within Item No. 19 as 'cotton fabrics' for which, in the instant case, duty at the rate of 25 paise per square metre has been prescribed under Item No. 5(b). of Notification No. 29/66 dated March 1, 1966 and, if not, whether the decision of the Central Board of Revenue that in the case of 'cotton fabrics' where the percentage of cotton is 40 per cent or more by weight of the total, such goods will be classified as 'cotton fabrics', has the force of a statutory rule.

It is an undisputed fact that except the decision of the Central Board of Revenue, there is no other provision in the Act, or Rules or Notification to effect that fabrics in which the percentage of cotton is 40 percent or more by weight of the total product will be deemed to answer the description in Item No. 19 that they are 'partly from cotton' so as to fall in the description of 'cotton fabrics'. The short question, therefore, is whether the decision of the Central Board of Revenue can have the statutory force which will make the two Demand Notices legal and valid.

A similar question arose for decision before the Supreme Court in Orient Paper Mills v. Union of India, : 1973ECR1(SC) . The Supreme Court was dealing with the matter in an appeal by special leave arising from certain orders made by the Government of India, Ministry of Finance, Department of Revenue, New Delhi. The appellant company was carrying on business, inter alia, of manufacturing and sale of various kinds of paper at its factory. In particular, it manufactured 'packing and wrapping paper', 'printing and writing paper' and 'machine glazed paper' popularly known as 'M.G. Poster paper'. Upto February 28, 1961, the date on which the Finance Bill of that year was introduced in Parliament, 'Printing and writing paper' and 'packing and wrapping paper' were subject to Excise Duty at the rate of 22 nP. per kilogram, though the former was chargeable under Item 17(3) and the latter under Item 17(4) of the Firs Schedule to the Central Excises and Salt Act, 1944. The Finance Act of 1961 raised the Excise Duty payable under Item 17(4) to 35 nP. per kilogram with effect from March 1, 1961. From March 1, 1961, to August 1,1961, the Excise Officers levied duty on 'M.G. Poster paper' under Item 17(3), that is, at the rate of 22 nP. per kilogram. In other words, during that period as excise authorities treated 'M.G. Poster paper' as 'printing and writing paper'. Subsequently, the excise authorities began to treat this paper as 'packing and wrapping paper' and insisted on the appellant company paying duty thereon under Item 17(4). The appellant company paid duty at that rate under protest and thereafter applied to the Assistant Collector of Central Excise for refund on the ground that the duty on that paper should have been levied under Item 17(3) and consequently, the duty collected was in excess of that leviable under law. The Assistant Collector rejected that claim. The appellant company went up in appeal to the Collector of Central Excise, who rejected the appeal. The matter was taken up in revision to the Government of India. The Government declined to interfere with the orders of the Collector.

Although the contention of the appellant company before the Assistant Collector, the Collector was well as the Central Government was that 'M.G. Poster paper' is a 'printing and writing paper' and it was considered as such by the Indian Tariff Board in the Tariff Commission Report published in 1959 and in the specifications published by the Indian Standards Institution and it was dealt as 'printing and writing paper' in the annual rate contracts entered into between the appellant company and the Government of India for supply of papers and paper-boards to the Government , this contention was not examined either by the Collector or by the Central Government. The decision of the Collector was based on the following ground :

'The Central Board of Revenue have already made it clear that all types of poster paper of whatever colour including white should not be treated as 'printing and wrapping paper'. As such, the Poster paper has not been wrongly assessed.'

As can be send from the report, the Supreme Court took the view that the only ground on which the Collector has rejected the appeal of the appellant company was that the question was covered by the direction issued by the Central Board of Revenue.

During the pendency of the revision application filed before the Central Government, the Collector, in response to the notice served on him, filed his objections, in writing. In objections, he pleaded primarily two grounds in opposition to the appellant company's claim : (1) that on chemical examination it was found that 'M.G. Poster paper' was 'packing and wrapping paper' and (2) the direction issued by the Board was binding on him. The Government rejected the revision application with these observation :

'The Government of India have carefully considered all the points raised by the petitioners, but they regret that they do not find any justification for interfering with the order in appeal. The Revision Application is accordingly rejected.'

The Supreme Court regarded this order by no means a speaking order because it was not possible to spell out from that order the reasons that persuaded the Government to reject the revision application. The Supreme Court took the view that the best that could be said in favour of the Government was that it had thought that the direction issued by the Board referred to earlier was decisive of the matter. Both the Collector and the Central Government having thus decided the matter in exercise of their power, which was quasi judicial power, solely on the basis of the certain direction of the Central Board of Revenue, the Supreme Court made the following observations :---

'There is hardly any doubt that the power exercised by the Appellate Authority, i.e., the Collector, under section 35 is also a quasi judicial power. He is designated as an Appellate Authority; before him there was a lie between the appellant which had paid the duty and the Revenue; and his order is subject to revision by the Central Government. Therefore, it is obvious that the power exercised by him is a quasi judicial power.'

and further :---

'If the power exercised by the Collector was a quasi judicial power-as we held it to be- that power 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 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 are judges 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 the 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 in 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 37 of the Act.'

This view of the Supreme Court, in my opinion, fully supports the contention raised on behalf of the petitioners that the two Demand Notices had no statutory authority when they called upon the petitioners to pay processing charges at the rate of 25 paise per square metre on the ground that the fabrics contained cotton in excess of 40 per cent and, therefore, they satisfied the definition 'cotton fabrics' in Item No. 19 of the First Schedule to the Act. The two Demand Notices cannot, therefore, be regarded as legal and valid and the orders passed by the three authorities upholding the legality and validity of the Demand Notices cannot be said to be correct.

Against this view, which I am inclined to take, Mr. Sukhthankar on behalf of the respondents has made the following four submissions :---

(1) Rule 233 provides that the Central Board of Revenue and Collectors may issue written instructions providing for any supplemental matters arising out of the Rules. It is no more than a 'supplemental matter' arising out of the Rules to say that a fabric containing 40 per cent or more of cotton by weight of the total product would answer the description 'fabrics manufactured partly from cotton' and fall under 'cotton fabrics' mentioned in Item No. 19. The decision of the Central Board of Revenue having been thus taken under Rule 233, which itself is framed under the Act, can be said to have a statutory force.

(2) The petitioner had never taken the point before the Assistant Collector, the Collector or the Central Government that the decision of the Central Board of Revenue had no statutory force and that point cannot be allowed to be raised, for the first time, in a writ petition.

(3) Even if the authorities have proceeded on wrong basis, if there is a legal basis, that is, power to charge duty, they can still charge duty and the demand notices cannot become invalid on that account.

(4) The petitioners have already paid the duty, as demanded in the two Demand Notices, the question hardly survives, whether the Demand Notices were valid.

All these submissions are, however, squarely answered in the Supreme Court decision in Orient Paper Mills v. Union of India. Previously 'printing and writing paper' and 'packing and wrapping paper' were subject to Excise Duty at the rate of 22 nP. per kilogram, though the former was chargeable under Item 17(3) and the latter under Item 17(4) of the First Schedule to the Act. The Excise Officers were levying duty on 'M.G. Poster paper' under Item 17(3), that is, at the rate of 22 nP. per kilogram. In other words, the excise authorities treated 'M.G. Poster paper' as 'printing and writing paper'. Subsequently, they began to treat this paper as 'packing and wrapping paper' and that was on the basis of the direction given by the Central Board of Revenue that all types of poster paper of whatever colour, including white, should not be treated as 'printing and writing paper' but as 'packing and wrapping paper'. The Supreme Court held that this direction of the Central Board of Revenue fell outside the scope of Rule 233, because that rule provided that the instructions in respect of any supplemental matters relating to administrative matters alone could be issued under the rule and not instructions of the type that had been issued in that case. The position is very much similar here. It could not be said that the decision of the Central Board of Revenue that fabrics in which the percentage of cotton is 40 per cent or more by weight of the total product would be classified as 'cotton fabrics' and subjecting it to appropriate processing duty, was a mere administrative matter for which instructions could be issued under Rule 233. In the instant case, the Central Board of Revenue had issued administrative instructions which the authorities exercising quasi judicial power had regarded themselves to be bound by and they had based their decision upon the administrative instructions. That could not be done. (Emphasis mine).

Turning the second submission of Mr. Sukhthankar, the Supreme Court has observed in the case of Orient Paper Mills that where the directions issued by the Central Board of Revenue completely vitiated the proceedings and made a mockery of the judicial process, then even if the question of the legality of the direction issued by the Board had not been taken up before the authorities under the Act, the Court ought to go into the question of the legality of the direction.

Turning to the third submission of Mr. Sukhthankar, before the Supreme Court also in the case of Orient Paper Mills it was urged that the Court should decide the matter on the basis of the material on record. This request was turned down with the observation that it was the duty of the authorities under the Act to go into questions of fact and for that reason, the Supreme Court remitted the proceedings to the Collector for deciding the question which arose in that case.

Turning to the final submission of Mr. Sukhthankar, the mere fact that the petitioners had already paid duty in pursuance of the Demand Notices would not make any difference. In the first place, the payment was made under protest, which was also the case in Orient Paper Mills v. Union of India. If the Demand Notices are otherwise not legal and valid, they must be struck down, notwithstanding the fact that the petitioners had made the payment demanded by those notices.

Mr. Sukhthankar next tried to distinguish the decision in Orient Paper Mills v. Union of India. According to him, the view taken in that case, that because the direction completely vitiated the proceedings and made a mockery of the judicial process, the Supreme Court ought to consider the legality of the direction, notwithstanding the fact that the question of the legality of that direction issued by the Board had not been taken before the authorities under the Act, is not available to the petitioners in the instant case. The Supreme Court was dealing with an appeal by special leave, whereas the petitioners here have filed a writ petition. A new point that had not been taken before may be allowed to be raised for the first time in an appeal, but a new point which had never been raised before it could not be allowed to be raised in a writ petition. In support of his proposition, Mr. Sukhthankar relied upon two decision in Mahamad Umarsahabe v. Kadalaskar, : [1969]3SCR966 and Kanji Kurji v. Kala Gopal, 59 Bom.L.R. 846. I do not think that it is possible to distinguish the decision of Orient Paper Mills merely on the ground that what the Supreme Court was dealing with was an appeal by special leave. The important observations are that when the direction completely vitiated the proceedings, then the Court ought to consider the legality of the direction even if the question of the legality of the direction had not been taken before the authorities under the Act. The observation made in the two decisions cited by Mr. Sukhthankar were made in a different context and cannot furnish an authority for the view propounded by Mr. Sukhthankar that in a writ petition in no case a new point which had not been raised before the lower authorities can be allowed to be urged.

Mr. Sukhthankar finally submitted that there has been a considerable delay in filing this Writ Petition. The order of the Central Government was passed on August 29, 1970, whereas the present Petition was filed on February 18, 1971. On the ground of this delay, therefore, the Petition should be dismissed. In paragraph 20 of the petition, as well as in paragraph 1 of the rejoinder filed by the Director of the petitioner-company, the delay has been explained. Moreover, mere delay by itself is no bar to the entertaining or the granting of the petition, unless it has caused prejudice to the opposite party. This was the view held by the Supreme Court in The Moon Mills v. M.R. Maher. In the instant case, there is not even an allegation of prejudice as a result of the delay in filing the writ petition.

As I have notice, the first Demand Notice was issued under Rule 104 and the second under Rule 9. The Assistant Collector and the Collector have based their decision on the second notice under Rule 9. It is only the Central Government that has referred to Rule 10 and Rule 10-A in its order dated August 29, 1970 and has upheld the first Demand Notice which was under Rule 10-A. Mr. Advani on behalf of the respondents conceded before us, and rightly so, that the removal of the goods from the factory premises not having been clandestine, Rule 9(2) will not apply to the present case. The controversy is whether Rule 10 or Rule 10-A applies. In view of the above statement of Mr. Advani, the view taken by the Assistant Collector and confirmed by the Collector cannot prevail, because they have based their orders only on the second Demand Notice issued under Rule 9.

J.R. Vimadalal, J.

I agree and have nothing to add.

(BY THE COURT) :

For the reasons stated in the judgment of Sapre, J., we make the rule absolute and set aside the orders of respondents Nos. 1, 2 and 3. Following the course adopted by the Supreme Court in its judgment in Orient Paper Mills case (para 14), cited in the judgment of Sapre, J., we remit the proceedings to respondent No. 3, or his successor in office, for the purpose of considering whether the goods in question are liable to be assessed under Rule 10 or under Rule 10-A and, if so, the further question as to whether they should be assessed as products made of rubber or plastics, or as processed fabrics, e.g., cotton fabrics, rubberised or plastic treated, as the case may be, on his own, without regard to the decisions of the Central Board of Revenue published in Trade Notices Nos. 65 (MP) Cotton Fabrics 1963 and 135 (MP) Cotton Fabrics (5)/63. The respondents must pay the petitioners' costs of this petition.


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