1. This Petition seeks to challenge the view taken by the authorities under the Central Excises and Salt Act, 1944, hereinafter referred to as 'the Excise Act', regarding an item, being Item 14D under the First Schedule of the said Act. The first Petitioner is a private limited company incorporated under the Companies Act and having its registered office as well as factory at Poona. The second Petitioner is a shareholder at the same time holding the position of the vice president of the first Petitioner company. The First Petitioner, as already mentioned above, owns a factory at Poona which is engaged in manufacturing in-organic and organic pigments and chemicals. Among the chemicals which are manufactured by the first petitioner are Meta-Nitro-Para Toluidine, hereinafter referred to as 'MNPT' and Meta-Nitro-Para Anisidine, hereinafter referred to as 'MNPA'. Both these chemicals belong to what has been described as Aromatic Amine groups and are utilised, according to the Petitioners, in the manufacture of pigment dyestuff which in turn are used for the manufacture of paints and printing inks. There is agreement between the parties that MNPT is a synthetic organic derivative id is known in the trade as fast base used in the manufacture of pigments. There is however dispute between the parties about its use in the dyeing process. No reference will hereinafter be made to MNPA as in the proceedings leading others Petition the Petitioners gave up their challenge to the levy of excise duty on that product. This Petition therefore has confined its challenge to the levy of excise duty under Item 14D of the First Schedule to the Act in respect of synthetic organic derivative of MNPT alone.
2. In the year 1968 the Petitioners were called upon the Excise Department of Poona to pay excise duty on the manufacture of MNPT at the rate mentioned against Item 14D in the First Schedule. The item as it stands in its applicability to the petitioners' product was introduced on 1st of March, 1962 and prescribed 25% ad valorem duty. That entry may be reproduced :
'14D. Synthetic organic dyesutff (including pigment Twenty fivedyestuffs) and synthetic organic derivatives used in per centany dyeing process. ad valorem.'
In reply to the demand made by the Excise Department for the payment of excise duty on MNPT, the Petitioners represented that MNPT was not liable to any excise duty under Item 14D because according to them that product was not by its lf capable of being used in the dyeing process. After the Petitioners were heard in support of their representation, the Assistant Collector of Central Excise, Poona-II by his letter dated 17th of February, 1969 informed the Petitioners that in his opinion the product MNPT was capable of being used in a dyeing process and therefore the Petitioners must pay appropriate duty under Item 14 D of the First Schedule of the Act. The contention of the Petitioners that the product was not liable to duty on the ground that the same was being used in the further manufacture of pigment dyestuff in the Petitioners' own factory was also rejected by the Assistant Collector who held that there was no provision for exempting synthetic organic derivatives used for the manufacture of pigment dyestuff. Against this order the Petitioners preferred an appeal which was heard and dismissed by the Collector of Central Excise, Poona, by his order No. V-14p(2)3/Rech. B/69/270 dated 2nd of November 1970. While rejecting the appeal preferred by the Petitioners the Collector also took the view that MNPT is used in dyeing silk, nylon and cellulose acetate in conjunction with other chemicals and therefore it was liable to duty.
3. Against this order passed in appeal by the Collector, the Petitioners preferred a revision application to the Government of India. The revision application was heard by the Joint Secretary to the Government in the Department of Revenue and Insurance in the Ministry of Finance. Before the revisional authority some additional material in support of their case was placed by the Petitioners. They tendered affidavits of two persons who were acquainted with the manufacture of chemicals to the effect that 'MNPT was used mainly in the manufacture of pigments and it was lot capable of being used in any dyeing process by itself. A public notice issued by the Assistant Collector of Central Excise of Poona was also produced before the revisional authority. That notice mentioned that the Board of Central Excise had been advised that Aniline oil was being used substantially by industries for purpose other than dyeing in textile industries. The notice further proceeds to point out that by reason of this the Board was of the view that Aniline Oil was a chemical agent falling outside the purview of Item 14D of the Central Excise. Reliance placed by the Petitioners on this notice, which is dated 7th of July 1972, was for the purpose of pointing out that the Excise Department itself had taken a view in respect of another synthetic organic derivative that if it were used mainly for purpose other than dyeing then it was not liable to excise duty under Item 14D. Some information relating to the production of MNPT was also placed before the revisional authority in the form of a table which disclosed that of the total production of MNPT in the country nearly 97.8% was used in the manufacture of Pigments. This table sought to buttress the claim of the Petitioners that MNPT, a synthetic organic derivative, if not used predominantly in the dyeing process was not liable to excise duty. At this stage three contentions which were urged before the revisional authority below and which have been urged before us may be enumerated.
(1) MNPT which is a synthetic organic derivative becomes liable to excise duty only when it is used predominantly in a dyeing process and not otherwise. Merely because it is capable of being used in the dyeing process, it does not render itself liable under Item 14D.
(2) The product is also not liable to excise duty because by itself it is not used in any dyeing process. It can be so used only in conjunction with other products.
(3) Since almost the entire production of MNPT of the Petitioners' factory is used in the factory itself in the manufacture of pigments, no excise duty is payable because such duty is payable only on a product which is removed from the factory.
As far as the second contention mentioned above is concerned, we straightway reject the same because we are satisfied on the arguments advanced and the material placed in these proceedings that MNPT is used in the dyeing process though along with other products. Merely because it cannot be used except in conjunction with other products, it cannot escape the liability under Item 14D. It is only if it was transformed into some other product before being used in the dyeing process than its liability for being taxed under Item 14D could have been questioned. The revisional authority by his judgment and order dated 2nd June, 1972 rejected also the other two contentions of the Petitioners. On the question of the predominant use the revisional authority held as follows :
'...So long as the product is a synthetic organic derivative of the type used in any dyeing process, it would attract levy of excise duty under Item 14D of the Central Excise Tariff, no matter to what extent it is used actually in a dyeing process....'
In other words he categorically rejected the theory of predominant use set up by the Petitioners One other contention viz. that no duty was leviable because the product was used within the factory the revisional authority stated that:
'...this plea is ill-conceived because Rule 49 has to be read in conduction with Rule 9 which expressly provides that duty will have to be paid on goods when removed in or outside the place of manufacture....'
The aforesaid order dated 2nd of June 1972, which is numbered as Order No. 894 of 1972 is the subject matter of challenge in this petition under Article 226 of the Constitution. It may be stated at this stage that the proceedings described so for related to the liability of the Petitioner to pay excise duty for the year ending 31st January, 1969. The Petitioners have mentioned in this petition that subsequent to the order which is the subject matter of the challenges they have from time to time upto 31st of December, 1972 paid duty as mentioned in Exh. D to the Petition. The total amount of duty paid on MNPT from 8th of August, 1968 to 31st of December, 1972 is mentioned to be Rs. 6,44,174.88. The reliefs claimed in this petition include the writ of mandamus for the refund of duty so paid as mentioned above. The prayer for setting aside the three orders mentioned above is naturally the main prayer.
4. Before the arguments in support of the petition are considered, it would be appropriate to dispose of preliminary objections which have been raised by the learned Counsel appearing for the respondents who are the Union of India and two officers of the Central Excise. The objection to the maintainability of the petition has been taken on the ground that there is no error of jurisdiction in the passing of the orders which the authorities below have passed inasmuch as they were authorised to pass such orders. According to Mr. Sukhtankar, the learned Counsel appearing for the Respondents, it is an order of assessment of excise duty which is intra vires of the Act under which that order is passed and merely because it is a wrong order, assuming it to be so, the same cannot be challenged in a petition under Article 226 of the Constitution We have no hesitation in rejecting the same because in our view the jurisdiction of the High Court under Article 226 of the Constitution to examine the legality of an order passed by assuming the jurisdiction where none exists cannot be questioned. If on a proper interpretation of the item in the Schedule of the Central Excise Act it is found that the item is not liable to Central Excise, then the order passed must be held to be an illegal order or an order without the jurisdiction liable to be set aside by this Court in exercise of its powers under Article. 226 of the Constitution. The other two preliminary objections could be clubbed together. It has been contended that for the period subsequent to 31st of January, 1969 the petitioners have not exhausted the remedy provided by way of an appeal and revision and they cannot be allowed in such circumstances to invoke the writ jurisdiction of this Court under Article 226 of the Constitution. As a further extension of the same argument, it has been contended that for the refund of the duty which is already paid, through under protest, a suit is an appropriate remedy. We are unable to uphold these two preliminary objections because in our opinion the error of law committed by the authorities below in respect of the very first assessment, if corrected, will entitle the petitioners to claim refund of the amounts which they have paid. The rule of exhaustion of alternative remedy is wholly inapplicable in the present case because the authorities who have taken a particular view in respect of a particular item manufactured by the petitioners are not expected to take a different view merely because the assessment relates to a subsequent period. In such circumstances it is unnecessary to drive the petitioners to the so-called alternative remedy. We also do not think that this petition could be thrown out on the ground that an alternative remedy such as civil suit is more appropriate. It may be mentioned that this petition claiming among other things refund of excise duty which has already been paid is not intended to circumvent a law such as the law of limitation. The petitioners can always file a suit for the refund of duty paid under mistake of law which can only be established after the present petition is decided within three years from the date of the decision. If the law is laid down in this petition and if thereafter the Petitioners can file a suit there is no reason why a relief which can be given only on the basis of a law should be denied to the Petitioners and why they should be driven to file a separate suit. Rejecting all the preliminary objections raised on behalf of the Respondents we now proceed to consider this petition on merits.
5. Item 14D under which excise duty is sought to be levied by the Respondents has already been reproduced above. There is no dispute that MNPT, a product manufactured by the Petitioners, is a synthetic organic derivative. What is disputed by the Petitioners is their liability to pay excise duty. According to the petitioners, no excise duty is leviable on the said product unless the same is substantially used in a dyeing process. It is not disputed that it is capable of being used in a dyeing process or it is sometimes used in dyeing process. According to the Petitioners, MNPT is predominantly or mainly used in the manufacture of pigments and only a small percentage of the total manufacture of MNPT is used in the dyeing process. According to Mr. Taraporewalla, appearing in support of the Petition, the word 'use' does not mean usable or capable of being used. It means that the product must in fact and in substance be used in the dyeing process. A stray or a rare use of the said product made in the dyeing process does not render that product liable to the excise duty. In support of this contention he referred to table which was tendered before the revisional authority and which according to the petitioners shows that 97.8 per cent of the MNPT manufactured in the country is used in the manufacture of pigments and only 2.2% is used for other purposes including the purpose of dyeing process. He then referred to a judgment of the Supreme Court in M/s. Annapurna Carbon Industries v. State of Andhra Pradesh : 3SCR561 . The facts of that case disclose that are carbons known as Cinema Arc Carbons were the subject matter of a levy under the Andhra Pradesh General Sales Tax Act, 1957 under the entry No. 4 of Schedule 1 to the said Act. That entry read as follows :
'Cinematographic equipment including cameras, projectors, and sound recording and reproducing equipment, lenses, films and parts and accessories required for use therewith.'
6. The question that fell for determination before the Supreme Court was whether the words 'required for use therewith' meant for dominant or main use in connection with cinematographic equipment. After analysing several decisions in connection with the subject and after analysing the concept involved in the product, the Supreme Court held that the entry, under consideration linked the taxable object with its general or ordinary use Though the entry itself did not contain the name of the item 'Arc Carbon' it was found to be included in the word 'accessories'. The Supreme Court proceeded to hold that the accessories referred to in the entry necessarily meant accessories required for common use in connection, with cinematographic equipment. It was noticed that the Arc Carbon was used and was capable of being used in several other equipments, such as search lights, signaling, stage lighting, etc. This fact, said the Supreme Court, could not detract from the classification to which the carbon arcs belonged. That is determined by their ordinary or commonly known purpose or use.
7. This reliance placed by Mr. Taraporewalla on the decision of the Supreme Court in Annapurna's case is, in our opinion, justified. If according to the petitioners the synthetic organic derivatives viz. MNPT is very rarely used in the dyeing process, it could not be the function of the Legislature to subject such a synthetic derivative along with other synthetic organic derivatives which may be used on a large scale in the dyeing process, to a duty under item 14D. In the context in which the word 'used' is used, in appears to that it necessarily means predominantly used of commonly used. If the ordinary or common purpose or use of MNPT is not the dyeing process, then it cannot be regarded as a synthetic organic derivative used in the dyeing process. The mention of the words 'synthetic organic derivative used in any dying process' shows that the legislature did intend to exclude some synthetic organic derivatives from the liability to pay excise duty under Item 14D. Only those derivatives which were used in a dyeing process were made subject to duty under Item 14D. If it is permissible to gather the intention of the legislature in using the word 'use', it may be stated that it could not have been such intention to rope in a product which is rarely or uncommonly used in a dyeing process. Considering the interpretative methods used by the Supreme Court in Annapurna's case it would not be unreasonable to hold that it is the common, ordinary, main or predominant use of a synthetic organic derivative that is to be considered while judging its liability to duty under Item 14D.
10. There is however one item i.e. 14-I (4A) which is as follows :
'Dispersed organic pigments ordinarily used for the printing of textiles, whether in the form of powder, paste, or in emulsion.'
The use of the words 'ordinarily used' in this entry may be for the purpose of describing the product 'dispersed organic pigments' and to that extent lends support to the argument of Mr. Sukhtankar. It may however be noted that Item 14D, with which we are concerned, was introduced in the Schedule of the Excise Act with effect from 1st of March, 1962 while the item of dispersed organic pigments was inserted with effect from 1st of March, 1964, that is to say, nearly 2 years after the item with which we are concerned was placed on the statute book. In such a situation it is possible to hold that the Legislature used a specific expression in the later enactment as a message of abundant caution. As the Supreme Court has pointed out in Harisli Chandra v. Triloki Singh, : 1SCR370 , relying upon a passage in Maxwell, an intention to alter law which was previously applicable is not necessarily to be inferred by the use of a somewhat different expression in a later enactment. In a given case the Court can draw an inference that additional words were used under the influence of excessive caution. That a Legislature can use words by way of abundant caution is also recognised by the Supreme Court in Union of India v. Gujarat Wooller Felt Mills, : 1977(1)ELT24(SC) . Apart from these considerations we are content to rest our decision on the entry as it stands in Item 14D and the use of the word 'used' in the context of the products mentioned therein to the light of the decision of the Supreme Court in Annapurna's case. We are therefore satisfied that the word 'used' in Item 14D means substantially or commonly used and not used rarely or occasionally or capable of being used.
11. The question whether MNPT is substantially or commonly used in the dyeing process, is essentially a question of fact which cannot be decided in the absence of adequate evidence in that regard. The material in support of this contention of theirs was placed by the petitioners only before the revisional authority. It is proper that authorities lower than the revisional authority should consider this question in the light of proper evidence. With this view which we take we are inclined to remand the case to the appeal court below despite the fact that the details of total production given in the table annexed to this petition have not been in terms denied by the, affidavit-in-reply to this petition. While it is true, as Mr. Sukhtankar complaints, that the Petitioner ought to have at the earliest opportunity placed adequate material before the Court of first instance or at the latest before the Court of appeal it also cannot be gainsaid that a taxing authority must satisfy itself before proceeding to tax that the item is taxable strictly according to the terms of the statute. In this view of the matter it will be in the interest of justice that the question should be decided by the Collector of Central Excise, Poona, who is the appellate authority in the light of material that may be placed before him by the petitioners and also in the light of the material which may otherwise be brought to his notice.
12. On the question of the non-liability of the petitioners to pay tax on the ground that the product MNPT manufactured by them is used in the factory itself, we notice that the revisional authority has committed a patent error of law. The revisional authority has mentioned that Rule 9 read with Rule 49 of Central Excise Rules provides that duty will have to be paid on goods when removed in or outside the place of manufacture. We have carefully read both the rules and we are unable to subscribe to the view .which the revisional authority has taken. Rule 9 provides that no excisable goods shall be removed from any place where they are produced or in premises appurtenant thereto, whether for consumption, export or manufacture of any other commodity in or outside such place until the excise duty leviable thereof has been paid. The words 'in or outside' occurring in Rule 9 do not qualify the words 'shall be removed' on the other hand they go with the words immediately preceding them. Rule 49 does not contain the word 'in' at all. Rule 9 as it stands without the, support of any other rule does not, in our opinion, make an article liable to excise duty if it is removed in a place where it is manufacture....
Mr. Sukhtankar, however, pointed out that the order of the revisional authority is supportable by reference of the provisions contained in Chapter VII-A of the Central Excise Rules which are applicable to what is known as self-removal procedure. Unfortunately, the authorities below did not view the liability to pay tax in the light of the provisions contained in Chapter VII-A also.
13. Some debate took place at the Bar before use on the basis of two decisions - one of the Division Bench and one of the single Judge on the question of the liability of a product for excise duty on the ground that it is removed from the factory or removed in the factory. In Appeal No. 122 of 1972 decided on 20th of January, 1978, the Division Bench of this Court (Madan J. sitting with Kantawala C.J.), it was held that excise duty was payable only if the goods were removed from the premises in which they were manufactured. We however find from the facts of that case that that decision is wholly inapplicable to the present case because in that case there was no question of home consumption of the goods manufactured. In the decision of the single Judge, Tulzapurkar J. as he then was, in Misc. Petition No. 491 of 1964 decided on 30th of April, 1970 the provisions of Chapter VII-A were found to be inapplicable on the date on which the liability was to be considered. In our opinion, therefore, both these decisions do not cover the situation which has arisen in the present case. The Collector will therefore be free to consider the question afresh.
14. In the result, we partly allow this petition and make the rule absolute only in terms of Clause (a). We remit the case to the Collector of Central Excise, Poona, who will (a) consider whether the product MNPT is commonly or normally used in the dyeing process and then decide its liability for tax, under Item 14D of the Schedule to the Central Excise Act in the light of the observations made above in she Judgment (b) consider, after deciding the question in (a) above, whether in the light of the provisions of Chapter VII-A of the Central Excise Rules the Petitioners are or not liable to pay tax despite the fact that the product 1 NPT manufactured by them is consumed in the production of other production in their own factory and not removed from their factory premises. In view of the partial success of the petitioners and in view of the fact that the remand became partly at least inevitable on account of their failure to produce evidence at the appropriate time, we direct that the parties shall bear their respective costs in this petition.