Anshuman Singh, J.
The Petitioner Company, namely, M/s. E. Septon and Company Private Limited, is carrying on its business at Mirzapur and has installed a Woollen Spinning Factory and an Ice Factory. It manufactures woollen and shoddy yarns from the Woollen Spinning Factory and ice from the Ice Factory. The woollen and shoddy yarns manufactured by the petitioner company fall under Tariff Items No. 18(B) and 18(B)(1) of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) whereas the ice falls under Tariff Item No. 68 of the First Schedule. There is no dispute that the two commodities manufactured by the petitioner are classified under two different Tariffs of the First Schedule to the Act.
2. The petitioner has alleged that the Central Excise Authorities are compelling it to obtain a licence for running the Ice Factory in pursuance of Notification No. 105/80-C.E. dated 19-6-1980 as amended by Notification No. 48/81-C.E. dated 1-3-1981 (annexure 'II' to the writ petition) and it is against this action that it approached this Court under Article 226 of the Constitution of India for issue of a suitable writ, order or direction commanding the respondents Central Excise Authorities not to compel it to obtain a licence for running the Ice Factory. When this writ petition was filed the Standing Counsel appearing for the respondents was directed to file a counter affidavit. Since the counter and rejoinder affidavits have been exchanged between the parties and there are no private parties in the instant case, it was thought proper to dispose of the writ petition at this very stage finally on merits as contemplated by the second proviso to Rule 2 of Chapter XXII of the Rules of Court.
3. We have heard learned counsel for the petitioner and the Additional Standing Counsel for the Union of India, appearing for the respondents. Under Rule 8 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) the Central Government has power to exempt any excisable goods from the whole or any part of duty leviable on such goods. It is not disputed that the woollen and shoddy yarns manufactured by the petitioner company are exempted from the whole of the excise duty under Rule 8(1) of the Rules vide Notification No. 224/79-C.E. dated 13-7-1979 (annexure 1 to the writ petition). Rule 174 contemplates that every manufacturer shall be required to take out a licence and shall not conduct his business in regard to such goods otherwise than by the authority, and subject to the terms and conditions of a licence granted by a duly authorised Officer in the proper form. Rule 174 A of the Rules authorises the Central Government to exempt any goods or class of goods which are wholly exempted from the duty of excise leviable thereon from the operation of Rule 174. So far as the woollen and shoddy yarns manufactured by the petitioner company are concerned, the same have been exempted under Rule 174 A of the Rules by the Central Government. The aforesaid discussions amply prove that the woollen and shoddy yarns manufactured by the petitioner company are wholly exempted from the payment of excise duty under Rule 8(1) of the Rules and are also exempted from the operation of Rule 174 meaning thereby that the petitioner company is not required to obtain any licence from the Excise Authorities for manufacturing woollen and shoddy yarns.
4. Counsel for the petitioner has contended before us that since the two goods manufactured by the petitioner company do not fall under Tariff Item No. 68 of the First Schedule to the Act, the total value of capital investment made by the petitioner company on plant and machinery installed in the two units mentioned above cannot be clubbed together for grant of exemption as contemplated by the aforesaid notification dated 19th June 1980 as amended by notification dated 1st March 1981. The learned Additional Standing Counsel, appearing for the respondents, has urged that since the value of capital investment made by the petitioner on plant and machinery of both the units exceeds Rs. 20 lacs, it is not entitled to exemption and as such it is bound to obtain a licence under Rule 174 of the Rules. We are not prepared to accept the contention raised by the learned Additional Standing Counsel inasmuch as the aforesaid notification on which the respondents are relying is of no assistance to them. The condition precedent for invoking the authority under the said notification is that the two commodities manufactured by the petitioner company in different units must fall under Tariff Item No. 68. It is the admitted case of the parties that the two commodities manufactured by the petitioner company in two units fall under different Tariff Items. The respondents, therefore, cannot take the aid of the said notification for clubbing the total investment made by the petitioner on plant and machinery installed in the two units. From the aforesaid notification it is also evident that even the ice manufactured by the petitioner, though falls under Tariff Item No. 68 of the First Schedule, is exempted from payment of excise duty in case the clearance made by it does not exceed Rs. 30 lacs in a calender year. It is not the case of the respondents that the clearance made by the petitioner of Ice Factory has exceeded Rs. 30 lacs in a calender year and as such it is not entitled to exemption from payment of excise duty on the ice produced by it.
5. Lastly it was argued by the Additional Standing Counsel, appearing for the Union of India, that even if the ice is exempted from payment of excise duty, it does not cease to be excisable goods within the meaning of Section 2(d) of the Act and the petitioner is legally obliged to take a licence for manufacturing excisable goods as contemplated under Rule 174 of the Rules. This argument is also wholly untenable. A Division Bench of this Court in . -Nagarath Paints Private Limited, v. The Union of India and Ors. (Civil Misc. Writ No. 2615 of 1972) decided on 5th December 1977, expressed its agreement with the observation made in a decision of the Delhi High Court in Sulekh Ram and Sons v. Union of India [1972 Tax Law Reports 1771] which followed the decisions of the Supreme Court in Kailash Nath v. State of U.P. (A.I R. 1957 S.C. 790) and J.K. Steel Ltd. v. Union of India [A.I.R. 1970 S.C. 1173] that if the Central Excises and Salt Act and the notification are read together, the effect is that goods exempted from excise duty are taken out of the First Schedule to the Act and, therefore, such goods cease to be excisable goods within the meaning of Section 2(d) of the Act. In view of the aforesaid decision of this Court as well as the facts stated in the preceding paragraphs the stand taken by the respondents appears to be palpably unjustified and illegal inasmuch as the commodity produced by the petitioner is exempted from payment of excise duty and once it is exempted from excise duty, the same shall be deemed to have been taken out of the First Schedule to the Act and the petitioner cannot be compelled to obtain a licence as contemplated under Rule 174 of the Rules. In this view of the matter it must be held that the petitioner is not required to obtain a licence for manufacturing the ice in the Ice Factory.
6. In the result the writ petition succeeds and is accordingly allowed. We hereby direct the respondents not to compel the petitioner company to take a licence for manufacture of ice by it or to levy/demand any central excise duty on the ice manufactured by it if the clearance of the factory does not exceed Rs. 30 lacs, in a calender year as contemplated by the aforesaid notification. However, in the circumstances of the case parties shall bear their own costs.