H.N. Seth, J.
1. By this petition under Article 226 of the Constitution, petitioner M/s. Flocks (India) P. Ltd. seeks quashing of the order of the Central Government dated 23rd January, 1978 as also that of the order passed by the Assistant Collector, Central Excise, Kanpur dated 3rd November, 1979. The petitioner further prays for a suitable writ commanding the respondents to levy excise duty on the goods manufactured by it in accordance with Tariff Item No. 19-1 and to refund the excess duty charged from it under Tariff Item No 19-111 of the Central Excise Tariff.
Petitioner commenced production of flocked valvet, flocked suede and other flocked fabrics with effect from 1st January, 1976. The manufacturing process employed by the petitioner consists of applying adhesive to some cotton based cloth and thereafter processing the same through flocking chamber where flocksare attached to the sticky based cloth by electrostatic force of over one lakh volt. The fabric is then subjected to certain other processes and the entire process from beginning to the end is an integreted continuous process. There was a controversy between the. petitioner and the Central excise authorities with regard to the question as to whether duty payable by the petitioner on the flocked material produced by the petitioner was to be computed under Item No. 19-111 of the Central Excise Tariff or under Item No. 19-1 or under Item No. 68 thereof. Whereas the contention of the petitioner was that the said material was dutiable under Item No. 19-1 or Item No. 68 of the Tariff Manual; the department claimed that the duty in respect thereof was to be levied under Item No. 19-111 of the Central Excise Tariff. Items No. 19-1 and 19-111 of the Tariff run thus :-
'Item Description of goods Rateofduty
No. Basic Additional Handloom
duty duty cess
(1) (2) (3) (4) (5)
19-I Cotton fabrics other than (i) Twenty per Five per One rupe
embroided in the piece, in cent ad cent ad and nine
strips or in motifs and (ii) valorem valorem paise per
fabrics impregnated, coated sq. metre
or laminated with preparat-
ions of cellulose derivatives
or of other artificial plastic
II * * * *
III Cotton fabrics impregnated, The duty The duty The hand-
coated or laminated with for the for the loom cess
preparations of cellulose time being time being for the time
derivatives or of other arti- leviable leviable being levi
ficial plastic materials. on the on the able on the
base fab- base fab- base fabrics
rics, if not rics, if not if not
alalready already ready
paid plus paid. paid.'
2. The Assistant Collector, Central Exicse did not accept petitioner's plea and held that the product manufactured by the petitioner fell under item No. 19-111 of the Tariff and was dutiable accordingly. The petitioner then went up in appeal before the Collector, Central Excise who upheld the order of the Assistant Collector. Aggrieved, the petitioner took the matter in revision before the Central Government which, vide its order dated 23rd January, 1978, observed thus :-
'The base fabric before flocking is coated with acrylic emulsions, which is an artificial plastic material. Government of India, in the circumstances, observed that before the fabric in question undergo the flocking operation those become coated fabrics within the meaning of the Central Excise Tariff item 19-111 and attract duty at that stage. As it may not be possible to pay the duty on those coated fabrics under tariff item 19-IH before those are removed for flocking process the duty may be paid at subsequent stage after flocking is done. If, however, the cost in respect of the flocking operation can be separately identified this should be excluded for the purpose of assessable value of the fabrics in question when finally cleared. Subject to the above observation of the Government the revision application is otherwise rejected.'
It thus appears that according to the Central Government, duty under tariff item No. 19-IH was payable by the petitioner on the value of the fabric as and when it was coated with the material to which the flocks were subsequently attached.
3. It appears that the persons concerned with the industry of manufacturing flocked material made certain representations to the Government of India with regard to the item under which the product manufactured by them was to be dutiable. Accordingly a meeting of the Collectors of Central Excise was convened by Government of India on 1st December, 1978 and it was resolved that flocked fabric was liable to excise duty under item No. 19-1 of the Central Excise Tariff and not under item No. 19-111. The Central Government by trade notices No. 7/79, dated 12th January, 1979 (Chandigarh Collectorate) parallel to Calcutta No. 7/79, dated 15th January, 1979, Cochin No. 18/79, dated 23rd January, 1979 and Kanpur Collectorate trade notice No. 17/79, dated 25th January, 1979, made it clear that the flocked fabric is liable to duty under item No. 19-1 of the tariff. The respondents have filed a copy of the deliberations made at the tariff conference held in the year 1978 as Annexure CA.l. to the counter affidavit sworn by Saheb Singh, Assistant Collector, Central Excise, Division I, Kanpur which indicates that the respondents accepted the position that while manufacturing flocked material the resin treatment to the base fabric has a limited shelf and is not marketed per se; the coating process is incidental to subsequent flocking; thus the fabric flocked partly or all over cannot entir'ely depend on the preliminary process of coating which is only incidental to the flocking; and decided that the fabric flocked all over would for purposes of levy of duty fall under tariff item No. 19-1 and not under tariff item No, 19-III.
4. Immediately after issue of the aforementioned trade notices the petitioner applied to the Assistant Collector, Central Excise, Kanpur pointing out that the goods manufactured by it should be classified as falling under tariff item No. 19-1 and they be made liable to excise duty accordingly. The Assistant Collector, Central Excise, Kanpur, vide his order dated 9th May, 1979 informed the petitioner that its goods shall be cleared under tariff item No. 19-1 since 1st December, 1978 and that the classification list duly approved was being sent to the Superintendent, Central Excise M.O.R.V., Kanpur for information and necessary action. On receipt of the order dated 9th May, 1979, the Assistant Collector, Central Excise, Kanpur started collecting duty in respect of the goods manufactured by the petitioner in accordance with tariff item No. 19-1. The petitioner also made an application for refund of the excess amount of excise duty realised from it in the past under alleged mistaken view of law. However, on 3rd November, 1979 the Assistant Collector, Central Excise informed the petitioner thus :-
'In supersession of this office letter C. No. V(19)/(17) (27)/79/7346, dated 10th May, 1979, you are hereby informed that the Government of India's orders in revision F. No. 195/B/14/39/77-CX-V, dated 23-1-1978 will be operative ab initio in regard to the classification of flocked fabrics whereby your flocked fabrics would fall under Tariff Item 19-111 instead of 19-1, though the duty liability will be restricted to the stage of coating only, if separately identified.'
5. The petitioner then filed the present writ petition contending that whereas all concerned manufacturers, manufacturing goods similar to those produced by the petitioner, were being made to pay excise duty under tariff item No. 19-1, the petitioner has been made to pay excise duty under item No. 19-111 of the Central Excise Tariff. There is no nexus for aforementioned indiscrimination and the respondents cannot arbitrarily realise duty from the petitioner under tariff item No. 19-111. Moreover, on merits also the petitioner contended that it had been recognised that as a result of the trade conference the Government of India had accepted the position that merely by subjecting the fabric to resin treatment no marketable commodity came into existence. Coating of the plastic material on the concerned fabric was merely incidental to the subsequent flocking. In these circumstances the Government of India was, vide its order dated 23rd January, 1978, not justified in directing that the petitioner would be liable to pay duty on the goods manufactured by it under tariff item No. 19-111 after excluding from the value of the goods finally produced the cost of flocking operation, if the same was separately identifiable, and that the said order deserves to be quashed. The petitioner further contended that once the Assistant Collector, Central Excise had, vide his order dated 9th May, 1979, classified the petitioners goods for purposes of payment of excise duty as falling under item No. 19-1, he had no power to review the same and, on 3rd November, 1979 supersede that order and direct that the petitioner's goods shall stand classified as falling under tariff item No. 19-111.
6. On behalf of the respondents the prayer made by the petitioner has been contested on following two grounds :
1. That the revisional order dated 23rd January, 1978 passed by the Central Government in petitioner's own case continued to be binding upon it irrespective of subsequent trade notices issued by various Collectors. As the petitioner did not challenge that order, it continues to be liable to pay excise duty on the goods manufactured by it in accordance with that order, and
2. That the petitioner, during manufacture of the flocked material, did produce cotton fabric coated with cellulose derivatives of other adhesive material and that commodity in fact became dutiable under item No. 19-IIIofthe Central Excise Tariff, and as such was dutiable under that item. The order passed by the Central Government directing the computation of the value of that dutiable article, after excluding the cost involved in the flocking operation, if it was so separately identifiable, was, in the circumstances, duly justified.
7. So far as the petitioner's grievance that whereas manufacturers of the like goods were being subjected to duty under tariff item No. 19-1, the petitioner was being discriminated and was being made to pay duty under tariff item No. 19-III, was concerned, the respondents did not specifically deny that averment and contended themselves by saying that the petitioner had not given any particulars of the manufacturers who were being so subjected to duty under tariff item No. 19-1.
8. Having heard learned counsel for the parties, we are satisfied that the present petition has merit in it and that the two orders, namely, the one dated 23rd January, 1978 passed by the Central Government and the other dated 3rd November, 1979 passed by the Assistant Collector, Central Excise deserve to be quashed. What in substance the Central Government vide its order dated 23rd January, 1978 has done is that it has recognised the fact that the final product manufactured by the petitioner cannot be described as cotton fabric coated with cellulose derivatives or other artificial plastic material and as such it is not dutiable under item No. 19-111. It, however, felt that while during the process of manufacture of flocked material the petitioner coated the fabric with acrylic emulsion, which is an artificial plastic material, the dutiable product came into existence which was a commodity covered by tariff item No. 19-111. The value of such an article for the purposes of excise duty, could be worked out by deducting from the entire cost of production the cost involved in the flocking operation if the same could be separately identified. However, as is evident from the extract of the decision taken by the trade conference which appears to have been accepted by the Central Government (Annexure C. A. 1 to the counteraffidavit of Sri Saheb Singh) the fabric when it is coated with an acrylic emulsion for purposes of sticking flocks thereto is not marketable per se and that the coating process is incidental to the subsequent flocking. Excise duty is payable only on manufacture of goods which are per se marketable. So long as such marketable goods have not come into existence, no question of paying excise in respect thereof can possibly arise. In this view of the matter the order of the Central Government requiring payment of excise duty on the value of the fabric coated by the petitioner with acrylic emulsions with a view to subject the same to flocking operation cannot possibly be sustained.
9. Learned counsel appearing for the respondents argued that if the petitioner was aggrieved by the decision of the Central Government dated 23rd January, 1978, it should have sought appropriate relief much earlier. The petition filed by it in the year 1979 is extremely belated and should not be countenanced at this stage. We are unable to accept this submission. We find that after the Central Government gave that decision, the concerned trade ;units had made a representation to it to reconsider the matter as a result whereof the Central Government reconsidered the matter and various trade notices were issued clarifying the position that manufactured flocked material would be dutiable under tariff item No. 19 I and not under item No. 19-111, so much so that acting upon those trade notices petitioners goods had also been classified, under the orders of the Assistant Collector, Central Excise, Kanpur as falling under item No. 19-1. As the petitioner had in substance obtained relief in respect of the order of the Central Government in due course, it was not necesary for it to have approached this court or pursued any other remedy for seeking relief against the same Central Government's order dated 23rd January, 1978. The cause of action for the petitioner to pursue the remedy accrued afresh, when the Assistant Collector, Central Excise reversed the classification made by him and sought to reclassify the goods manufactured by the petitioner in accordance with the order of the Central Government dated 23rd January, 1978. We are accordingly of opinion that the petitioner cannot be denied any relief in respect of Government of India's order dated 23rd January, 1978 on grounds of laches.
10. It is obvious that in accordance with the decision taken in the trade conference, various trade notices were issued and flocked materials were classified as falling under tariff item No. 19-1 and all the manufacturers of flocked materials would thus be liable to pay duty on the goods manufactured by them under that classification. A perusal of the order passed by the Assistant Collector, Central Excise dated 3rd November, 1979 shows that the petitioner is being treated on a different footing merely because excise authorities think that the petitioner is bound by the order of the Central Government dated 23rd January, 1978. It does not disclose any other basis for treating the petitioner's case on a different footing. We have already held that the order of the Government of India dated 23rd January, 1978 cannot now be sustained and the very basis of the order passed by the Assistant Collector, Central Excise on 3rd November, 1979 disappears. In the circumstances it is not possible to sustain the order as well.
11. In this view of the matter, it is not necessary for us to advert to the argument raised on behalf of the petitioner that the order dated 3rd November, 1979 passed by the Assistant Collector, Central Excise was vitiated inasmuch as it purported to review an earlier quasi judicial order which it was not competent to do.
12. In the result, the petitioner succeeds and is allowed with costs. The order dated 23rd January, 1978 passed by the Central Government (Annexure 1 to the writ petition) and that dated 3rd November, 1979 passed by the Assistant Collector, Central Excise (Annexure V to the writ petition) are quashed. The classification, for purposes of payment of excise duty, made by the Assistant Collector, Central Excise vide his order dated 9th May, 1979 (Annexure IV to the writ petition) is sustained. The respondents are directed to realise excise duty on the flocked material produced by the petitioner treating the same as falling under tariff item No. 19-1 as envisaged by the order dated 9th May, 1979, and to refund to the petitioner any excess amount of duty realised by them in respect of the flocked material produced by the petitioner after 1st December, 1978.