1. The petitioners are a registered firm having their factory at Poona and the petitioners carry on business as manufacturers of semi and finished products of non-ferrous metals including Aluminium Canisters. The petitioners manufacture the aluminium canisters in a manner which would enable sensitive and delicate drugs to be stored or conveyed in a sterile condition. The aluminium canisters are made out of aluminium sheets. The canisters are of a designed shape, description and specifications which make them suitable for storage in sterile condition and for departmental transport or conveyance within a plant.
2. The respondents Nos. 5 and 6 - Hindustan Anti-Biotic Limited, and Indian Drugs and Pharmaceuticals Limited - are Government plants manufacturing life saving and sensitive drugs on a large scale. The respondent No. 7 - Geoffrey Manners and company Limited - is a private Company manufacturing life saving drugs.
3. Between February 19, 1972 and April 16, 1973 all the canisters manufactured by the petitioners were sold to respondents Nos. 5. 6 and 7. The respondent No. 5 purchased 7,749 canisters while respondent No. 6 purchased 6,276 canisters and respondent No. 7 purchased a very small quantity of 75 canisters.
4. From March 1, 1970, Tariff Item No. 46 was introduced in the Tariff Code and the Tariff Item No. 46 reads as tinder : -
'46. Metal Containers ;
'Explanation. - 'Containers' means containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or un-assembled condition, and containers known commercially as flattened or folded containers.'
In pursuance of this new entry, the Collector of Central Excise issued a Trade Notice on March 21, 1970. The said trade notice assured the trade that containers ordinarily intended for conveyance or storage of goods do not come within the scope of Tariff Item No. 46. On May 29, 1971, Item No. 27 was amended by introduction of Tariff Item 27 (f). The said Item No. 27 (f) reads as follows : -
* * * * *
(f) containers made of aluminium.
Explanation. - 'Containers' means containers ordinarily intended for packaging of goods for sale, including casks, drums, cans, boxes, gas cylinders and pressure containers, whether in assembled or unassembled condition and containers known commercially as flattened or folded containers.'
5. The petitioners made a representation to the Collector of Central Excise some time in July 1971 claiming that the aluminium canisters manufactured by them are not liable to excise duty. In support of their claim, the petitioners also produced before the Collector letters from respondents Nos. 5. and 6. The letter of respondent No. 5 dated December 23,1971, inter alia, states that the aluminium canisters are used for storing the product and conveying the same in various stages of production and only some of the canisters are being used for carrying the product to the bottlers and the same are returned back to respondent No. 5 after taking out the material. The letter dated February 16, 1972 from respondent No. 6, inter alia, states that the canisters are used for the same purpose as mentioned in the letter of respondent No. 5 and the same are used for shifting and transporting of bulk material to the bottlers and as such would not attract any excise duty. The Collector of Central Excise considered all this material and by a letter dated February 21, 1972 gave his opinion stating that the aluminium canisters manufactured by the petitioners and supplied to respondents Nos. 5 and 6 have been treated as non-excisable since they are not intended for packaging of goods for sale.
6. The petitioners received a letter dated April 16, 1973 from the Superintendent of Central Excise, inter alia, stating that the classification of aluminium canisters has been re-examined by the Collector and it is found that the canisters are covered by Tariff Item No. 27(f) read with explanation thereto. The Collector, therefore, cancelled the previous decision dated February 21, 1972. In pursuance of this change of opinion, the petitioners were served with a show cause-cum-demand notice dated April 28, 1973 under Rule 10-A of the Central Excise Rules, 1944 demanding a sum of Rs. 3,10,788.44 as an excise duty for the goods cleared between February 19, 1972 and April 16, 1973. The petitioners gave their reply setting out the reasons as to why their product was not liable for excise duty In addition to their statement, the petitioners also requested respondents Nos. 5 and 6 to address letters in that connection to the Collector of Central Excise. The respondent No. 5 sent letter dated April 30, 1973 pointing out that the aluminium canisters are used for stocking their own material for use in their plant and as such the question of selling the bulk antibiotics to any other parties does not arise. The letter dated May 15, 1973 addressed by respondent No. 6 to the Collector is more relevant as respondent No. 6 has clearly stated that the order dated April 16, 1973 cancelling the earlier opinion dated February 21, 1972 was erroneous and the revision was without appreciating the full facts of the case. The respondent No. 6 clearly stated that Tariff Item No. 27 (f) is attracted provided the canisters are ordinarily intended for packaging of goods for sale and only 4 to 5% of canisters purchased by respondent No. 6 are transferred to the bottlers for the purpose of packing the powder in glass vials before sale in the market. In spite of this material produced before the Assistant Collector, Central Excise, Poona, the Officer by his order dated December 3, 1973 treated the aluminium canisters as excisable goods covered under Tariff Item No- 27 (f) and confirmed the demand notice. The Assistant Collector took the view that the property of the goods sent in the canisters passes to the bottlers and the medicines after bottling is not returned to respondents Nos. 5 and 6 and, therefore, the process during which the canisters are being used involves a sale of the canisters. The petitioners carried an appeal against this order before the Appellate Collector of Central Excise but the appeal came to be dismissed with a cryptic order dated October 7,1974. The petitioners have preferred this petition under Article 226 of the Constitution of India to challenge the legality and validity of the orders passed by the authorities below.
7. Mr. Desai, the learned Counsel appearing in support of the petition, contended that Tariff Item No. 27 (f) has no application to the facts of the case as the containers are not ordinarily intended for packaging of goods for sale. Mr. Desai submitted, and in my judgment, rightly, that the material on record before the Collector prior to his opinion evidenced by letter dated February 21, 1972 was more than enough to warrant the conclusion that the aluminium canisters sold to respondents Nos. 5 to 7 are not ordinarily intended for packaging of goods for sale. The learned counsel further submitted that the Collector revised his opinion without there being any material before him and before the demand notice was confirmed, the petitioners did produce before the Collector the material to indicate that only 4 to 5% of the canisters sold to respondents Nos. 5 to 7 are transferred to the bottlers for packing the powder in glass vials. Mr. Desai submits that the letter of May 15, 1973 was not even considered by the Assistant Collector or by the appellate authority. The material in the shape of letters addressed by respondents Nos. 5 and 6 prior to the opinion dated February 21, 1972 and subsequent letters dated April 30, 1973 and May 15, 1973 leave no manner of doubt in my mind that the aluminium canisters manufactured by the petitioners are not ordinarily intended for packaging of goods for sale. The averments made in the petition clearly establish that the canisters are ordinarily intended for conveyance in the plant and for storage of goods and it is obvious that Tariff Item No. 27(f) is not at, all attracted.
8. Mr. Shah, the learned Counsel appearing on behalf of the respondents, contended that the petitioners have not made out the case before the lower authorities that the canisters are not ordinarily intended for packaging of goods for sale. Mr. Shah submits that the principal contention raised before the authorities below was that the containers are not intended for sale and what was agitated was that the containers are returned back by the bottlers after the contents are used for filling of the vials. Mr. Shah submits that once, it is established that the contents of the canisters are used for filling up of the vials which are ultimately sold in the market, then it must be concluded that the containers are not used merely for storage or conveyance in the plant but were intended for packaging of goods for sale. It is not possible to accept the submission of the learned counsel. It is clear from the letters produced before the Assistant Collector by respondents Nos. 5 and 6 that the petitioners did claim that the aluminium canisters are not ordinarily intended for packaging of goods for sale. The letter dated May 15, 1973 of respondent No. 6 clearly states that only 4 to 5% of canisters are sent to the bottlers for packing the powder in glass vials. This statement was clearly intended to establish that the canisters are ordinarily intended for storage and not for packaging of goods for sale. The Assistant Collector .while confirming the demand notice did not even refer to this material and in appeal, the Appellate Collector merely recorded it as a contention of the appellant but the operative order does not make any reference to that contention. In my judgment, the authorities below have overlooked the material on record and have proceeded on an erroneous assumption by taking into consideration irrelevant circumstances to hold that Tariff Item No. 27 (f) is attracted to the products manufactured by the petitioners.
9. Mr. Shah then submitted that in any event I should not quash the demand notice issued by the Assistant Collector but remit the proceedings back to the Officer for considering the material on record and recording a correct finding. Mr. Shah submits that while exercising jurisdiction under Article 226 of the Constitution of India, I should not evaluate on the merits of the petitioners' case and in support of this submission relied upon a decision of the Supreme Court in the case of M. Naina Mohammed v. K.A. Natranjan and Ors. reported in : 1SCR102 , The principle propounded by the Supreme Court is well-settled. I am not evaluating the material on record, but in my judgment, no worthwhile purpose would be served by remitting this proceedings back to the Excise authorities. The material on record is more than sufficient to uphold the claim of petitioners and I enquired from Mr. Shah as to what material is in possession of the Department to revise its earlier view and Mr. Shah very fairly stated that there is none. It is now well-settled that the burden to establish that a particular item attracts the tariff item for excise duty is on the department and if the department has no material to substantiate its claim, I fail to see any valid reason to remit the proceedings back to the Excise authorities for a fresh determination. In my judgment, accepting the material on record, which is not found to be untrue or incorrect by the two authorities below, it is abundantly clear that the demand notice issued by respondent No. 2 was totally erroneous. In my judgment, the petitioners are entitled to the relief sought in the petition.
10. Accordingly, the rule is made absolute in terms of prayer (a) of paragraph 26 of the petition. In the circumstances of the case, there will be no order as to costs.