1. The petitioner No. 1 is a Private Limited Company while the petitioner No. 2 is a partnership concern and the petitioner No. 3 is the Director and Share-holder of petitioner No. 1 and partner of petitioner No. 2.
2. The petitioners are manufacturing fibreglass cloth and tapes, varnished fibreglass cloth and tapes and mica tapes and sheets. Prior to October 2, 1972, the business was carried on in the name of partnership firm and on October 2, 1972, the petitioner No. 1 Company was incorporated and all the assets of the firm vested in petitioner No. 1 Company. The Company was manufacturing the products at Dombivali and at a later stage some products were manufactured at Worli.
3. In or about May 1971, Tariff Item No. 59 was introduced in the First Schedule of the Central Excises and Salt Act, 1944 and excise duty was levied on 'electric insulation tapes'. On June 19, 1971, the Collector of Bombay issued a Trade Notice bearing No. 110 stating therein that 'Electric insulation tape is a tape impregnated or coated with insulating compound used for covering joints in or open ends of electric wires and cables. Such tapes may have for packing, textiles cellulofic film or paper.'
4. On June 9, 1971, the partnership had addressed a letter to the Assistant Collector of Central Excise, Kalyan, giving details of the manufacture of the products and seeking advice as to whether the products attract excise duty under Tariff Item No. 59. The partnership concern received reply on June 16, 1971 that the query is receiving attention. On October 2, 1972, the Officers of the Preventive Branch of the Central Excise raided the factory premises of petitioner No. 1 Company at Worli and seized 40 Rolls of glass mica tapes valued at Rs. 720/- and 35 rolls of varnished fibreglass tapes valued at Rs. 1120/-. The raid was followed by show cause notice dated March 28, 1973 received from the Assistant Collector, Bombay, calling upon the petitioners to show cause why action should not be taken for contravention of provisions of Section 6 of the Central Excises and Salt Act (hereinafter referred to as the 'Act', read with rule 174, 173-Q(c) and Rules 173-F, 173-G(1), read with Rule 9(1), 173-G(2), read with Rule 52-G and Rule 173-G(4), read with Rule 53 and 226 of the Central Excise Rules, 1944. The gravamon of the charge was that the petitioner No. 1 Company cleared the goods liable to duty under Item No. 59 without obtaining requisite licence and without payment of duty during the period commencing from July 1971 to October 1, 1972. The petitioner No. 1 sent their reply on May 2, 1973 and after considering the same and giving due opportunity to make a personal representation, the Assistant Collector by his order dated December 29, 1975 confirmed the show cause notice and imposed the penalty of Rs. 200/- under Rule 173-G for manufacturing without licence and making clearance of excisable goods without following the procedure. The Assistant Collector also confiscated 75 rolls seized on February 5, 1973 but gave an option to redeem the same on payment of fine of Rs. 400/-. The Assistant Collector also recovered the duty at the rate of 10% ad valorem for the clearance made during the period from September 1971 to February 27, 1973, on the basis of material produced before him. The petitioners carried an appeal before the Appellate Collector of Customs, but that ended in dismissal by an order dated May 24, 1976 and the revision application filed before the Government of India, Ministry of Finance, met with the same fate by order dated December 14, 1977. These orders are under challenge in this petition filed under Article 226 of the Constitution of India.
5. Shri Hidaytullah, the learned counsel appearing in support of the petition, has raised four or five contentions to challenge the legality of the order. The first submission urged by the learned counsel is that the contents of trade notice dated June 19, 1971 were binding on the Department and the Excise authorities are barred from claiming that the product manufactured by the petitioners would fall within the Tariff Item No. 59 i.e. 'electric insulation tapes'. The trade notice mentions that electric insulation tape is a tape impregnated or coated with insulating compound used for covering joints in or open ends of electric wires and cables. The submission of the learned counsel is that thought the product varnished fibreglass tapes and glass mica tapes manufactured by the petitioners are impregnated or coated with the insulating compound, they are not exclusively used for covering joints in or open ends of the electric wires and cables.
6. Whether the product manufactured by the petitioners falls within Tariff Item No. 59 or not would be considered at a later stage and at present it would be appropriate to refer to the larger submission advanced by the learned counsel. It was urged that the trade notice issued by the Collector was binding on the Department and if it is established that the product manufactured by petitioner No. 1 does not fall within the explanation provided by the notice, then it is not open for the adjudicating authority to take a contrary view. In other words, the submission is that the ambit of the entry will have to be regulated or artificially restricted by the adjudicating authority in view of the issuance of the trade notice. The submission was advanced by claiming that the assurance was given to the trade at large by the trade notice and the Department is estopped from claiming contrary in view of the doctrine of promissory estoppel. In my judgment, the submission is without any merit. The Supreme Court in the case of Orient Paper Mills Limited vs. Union of India reported in A.I.R. 1960 S C 48 held that it was not open to a quasi-judicial authority like the Collector of Excise to permit himself to be swayed by an executive instruction given to him by the Central Board of Revenue and such direction completely vitiates the proceedings and makes a mockery of the judicial process. Shri Hidaytullah submits that the decision of the Supreme Court was in respect of the directions or the instructions given by the Board to the Collectors. In support of the submission reliance was placed on the decision of the Division Bench of Gujarat High Court in the case of Navgufarat Paper Industries vs. Superintendent of Central Excise and others reported in 1977 ELT 67. The Gujarat High Court took the view while relying upon the decision of the Supreme Court in the case of Union of India and others vs. M/s. Anglo Afghan Agencies reported in A.I.R. 1968 S C 718 that it is not open to the Department to get out from the stand taken in the trade notice if the manufacturers have acted on those trade notices and entered upon their manufacturing programme on the basis of what has been stated in the trade notices. With respect to the learned Judge, I am unable to share the view taken in that case. If the directions given by the Board of Revenue are to be kept out of consideration by the quasi-judicial authority deciding whether an article is liable to duty under a particular item, than it is difficult to see how the same quasi-judicial authority is to be shut out by reference to the trade notice. In my judgment, the reliance by the Gujarat High Court on the doctrine of promissory estoppel was not accurate. It is well-settled that there cannot be any estoppel against the statute and the authorities deciding the application of the statute cannot be bound by any direction or notices issued by the Department.
7. Shri Hidaytullah then referred to the decision in the case of Guest Keen Williams Limited vs. Union of India and others reported in 1980 Excise Law Times 76. This decision could not assist the submission of the learned counsel because the learned Single Judge has merely referred to the observations of the Gujarat High Court but has not expressed any opinion approving the same. In fact, the question of application of the decision did not arise because the order under challenge was set aside on the ratio of the Supreme Court decision in the case of Orient Paper Mills Limited (supra). The reliance was then placed on the decision of the Single Judge in the case of Star Chemicals (Bombay) Limited vs. Union of India and others reported in 1980 Excise Law Times 133. It is true that in paragraph 13 of the judgment, the learned Judge referred to the decision of the Gujarat High Court and held that the trade notice is binding on the Department. In my judgment, the observations made by the learned Single Judge in paragraph 13 of the judgment are clearly obiter. The learned Judge has found on merits in favour of the petitioners holding that rock phosphate whether in powder form or pebble form would be classifiable under Entry 35 of the Customs Tariff. Once having come to that conclusion, the learned Judge merely sought additional support by making reference to the argument based on the contents of the trade notice. The question as to the binding effect to the trade notice was not argued before the learned Judge and the obiter observations in paragraph 13 of the judgment cannot be considered as laying down any principle. In my judgment, the Department cannot be estopped nor can the quasi-judicial authority deciding whether a product is liable to duty under Tariff Item No. 59 can be estopped with reference to trade notice. The submission of the learned councel, therefore, must fail.
8. Shri Hidaytullah then submits that even assuming that the trade notice is not binding on the Department and on the authority deciding the applicability of the Tariff Item, still the notice should be so read as to restrict the ambit of Tariff Item No. 59. It is not possible to do so. The scope or the ambit of the statute or the provision cannot be read or its application restricted or limited with reference to the trade notice or the directions issued by the trade notice. Shri Hidaytullah relied upon the decision of the Supreme Court in the case of Navnit C. Jhaveri vs . K.K. Sen, Appellate Assistant Commissioner of Income-tax, Bombay reported in : 56ITR198(SC) . The Supreme Court held that the circulars issued by the Central Board of Revenue under the provisions of the Income-tax Act, would be binding on the officers and persons employed in the execution of the Income-tax Act. The reliance on this decision is misconceived because under Section 5(8) of the Income-tax Act, 1922, it has been clearly provided that the circulars are binding. The decision based on such statutory provisions cannot be imported to hold that the trade notice should be read to limit the ambit or the scope of Tariff Item No. 59.
9. Reliance was then placed on the decision of the Division Bench of the Gujarat High Court in the case of Balkrishna Rechhodlal Shah and others v. Assistant Collector of Central Excise, Ahmedabad and others reported in 1979 ELT 377. The observations in paragraph 5 of the judgment instead of supporting the petitioners go against the contentions urged by the petitioners. The Division Bench observed :
'Even though the trade notice could not alter the meaning of the words of the statute, it could be looked at as being an interpretation placed by the appropriate Government department on the words of the statute. Here we are not reading a trade notice for the purpose of controlling the plain meaning of the tariff entry. We are only read at it as even the Government construction fits in and support our prima facie construction of the relevant entry.'
These observations make it clear that the contents of the trade notice cannot conclude the ambit of the tariff item.
10. Shri Hidaytullah then urges that the product manufactured by the petitioners i.e., varnished fibreglass tapes and glass mica tapes are not electric insulation tapes. It was urged that the tapes are not impregnated or coated with insulating compounds, nor they are adhesive. The submission advanced by the learned counsel is diametrically opposite to what was pleaded by the petitioners right from the inception. In answer to the show cause notice, the petitioner No. 1 gave reply on May 2, 1973 and this is what was claimed :-
'Now though our product has fibreglass backing and is impregnated with varnish and backed by mica, these are not intended to be used and are never used for covering the open ends of joints or cables and wires, as required by the definition. Hence our products do not fall under purview of Central Excise Tariff..........
Our product cannot be considered as electrical insulation tape falling under Tariff item 59 because these tapes are never used for joining open ends of cables and wires.'
From this reply, it is crystal clear that the petitioners never debated that the tapes manufactured by them were impregnated with insulating compound (it is admitted that varnish is an insulating/compound) but what was challenged was that the tapes are not used for joining open ends of cables. The trade notice undoubtedly mentions that the insulation tape is a tape used for covering joints in or open ends of electric wires and cables.
11. Shri Chinai, the learned counsel appearing for the Department, very rightly pointed out that what has been stated in the trade notice is not exhaustive and it is not in dispute that the product manufactured by the petitioners is used for covering electric wires and cables, though it may not have been for covering joints in or open ends. Shri Chinai very rightly urged that the claim made by the petitioners in the reply to show cause notice was reiterated even in the appeal memo filed before the appellate authority and both before the Assistant Collector and Appellate Collector, it was never even claimed that the products manufactured by the petitioners are not known in the trade circles as electric tapes. Shri Chinai submits that for the first time before the Revisional authority, it was claimed that the product was not know in the commercial circles as electric tapes. The submission is correct and it is obvious that the petitioners have raised the contention about the product being known in trade circles as an after-thought for the first time before the revisional authority. Even assuming that it is open for the petitioners to do so, I find that the petitioners have miserably failed to establish that the product is not known in the commercial circles as electric insulation tape. The petitioners have produced no evidence whatsoever either in the shape of affidavits of the traders or any authoritative books on the subject. The petitioners solely relied upon the contents of the trade notice and the definition given in the Chambers Dictionary of Science and Technology (1971 Ed.) at page 620. The definition reads as under :
'Insulating tape (Elec. Eng.) Tape impregnated with insulating compounds, frequently adhesive; used for covering joints in wires etc.'
12. Shri Hidaytullah urges that the trade notice reflects the definition given in the Chambers Dictionary and the contents of the Chambers Dictionary should be taken as what is known in the trade by the expression 'insulating tape'. It is difficult to accept this submission. Shri Hidaytullah was unable to point out any authority to establish that the definition in the Chambers Dictionary should be taken as what is understood in the trade circles, about a particular product. Even assuming that the submission is correct, it is obvious that the product of the petitioners would be known as electrical insulation tape. It was urged that the tapes are not adhesive and are not used for covering joints of the wires. The submission is of no merit because the definition itself indicates that the tapes are frequently adhesive and are used for covering joints of the wires etc. The word 'frequently' clearly establishes that there are certain tapes which are not adhesive and the word 'etc.' indicates that the only use is not for covering joints. It is not in dispute that the tapes manufactured by the petitioners are, in fact, used for covering joints in or open ends of electric wires and cables. In my judgment, the petitioners have miserably failed to establish that their product was not known in the trade circles as the electric insulation tapes.
13. The learned counsel urged by relying upon some decisions of the Court that even though the petitioner failed to lead any evidence about the trade user, the burden is on the Department and the Department not having discharged that burden, the bare statement of the petitioners should be accepted. It is impossible to accept this line of argument. The petitioners are making a positive claim that their product is not known in the trade circle as electric insulation tapes and the petitioners must discharge that burden and the Department cannot be expected to prove a negative fact. I am not making any reference to the decisions cited as in my judgment, in none of those cases, any principle was laid down. The rules of Evidence Act are very clear and the stray observations in the judgment are not sufficient to hold that the burden of establishing that the product is not known in the trade circle as electric insulation tapes is on the Department as claimed by the petitioners.
14. A faint attempt was made by the learned counsel to urge that the Department has not levied duty under Tariff Item No. 59 on any unvarnished fibreglass tapes and, therefore, there was no occasion to levy duty on varnished fibreglass tapes. The submission is without any merit. It is only after varnishing that tapes become insulation tapes to warrant duty under Item No. 59. The learned counsel then urged that the provisions of Rule 9 of the Excise Rules have no application to the facts of the present case as the petitioners have removed the goods from the factory under the bona fide impression that the goods were not liable to duty under Tariff Item No. 59. It was urged that part of the claim under the show cause notice was barred by the rule of limitation contained in Rule 10 of the Excise Rules. In support of the submission, strong reliance is placed on the fact that on June 9, 1971, the partnership concern - the predecessor of petitioners No. 1 - had made enquiry about the liability from the Excise authorities and no answer was given till the raid was carried out in the year 1972. Shri Chinai rightly points out that the petitioner No. 1 as Limited Company cannot take advantage of the enquiry made by the partnership concern and that too not from the Excise Officer in Bombay, but from the Excise Officer at Kalyan. It is not in dispute that the goods were removed by the petitioners from their factory at Worli and it is not open for the Company to take shield behind some enquiry made by the partnership concern. The petitioners never made any enquiry from the Excise Officers at Bombay and, in my judgment, the provisions of Rule 9 are clearly attracted. Shri Chinai is also right in his submission that, in any event, the claim in the show cause notice would not be time-barred in view of the provisions of Rule 10A of the Rules. The submission of the petitioners that Rule 9 has no application as part of the claim in show cause notice was time barred has no merit and deserves to be repelled.
15. Finally, Shri Hidaytullah urged that imposition of penalty would cause an irreparable hardship to the petitioners and, therefore, the same should be set aside as the petitioners did not act malafide at any stage. The Assistant Collector had imposed the penalty of Rs. 200/- and the fine of Rs. 400/- on the petitioners, while the appellate authority reduced the penalty to Rs. 50/- and the fine to Rs. 100/- only. The petitioners have undoubtedly contravened the provisions of the Act and the Rules and the imposition of penalty and fine cannot be set aside. The imposition of fine and penalty does not involve any moral turpitude and it is not open for the Limited Company to claim that they were not aware of the provisions of the law. Shri Hidaytullah invited my attention to Rule 173-GG and urged that in view of the imposition of penalty it is possible that the Collector may not permit the petitioners from storing excisable goods in any goods in any godown or place within a distance of 2 Kilo metres from the factory of the assessee. Rule 173-GG is a discretionary rule and it is not that in every case of imposition of penalty and fine, the Collector would exercise the power. The mere fact that the Collector may exercise the power in some cases is no answer to set aside the order of penalty and fine which is negligible. In case, the Collector exercises the power erroneously, it is always open for the petitioners to approach this Court. In my judgment, the grievance on this ground is without any merit.
16. Accordingly, the petition fails and the rule is discharged with costs.