G.P. Singh, C.J.
1. This order shall also dispose of M.P. No. 852 of 1974 and M.P. No. 145 of 1977.
2. Petitioner No. 1 in all these petitions is Ganga Steel Rerolling Mills a regd. partnership consisting of petitioners 2 to 6 as its partners. The petitioners carry on the business of manufacturing iron and steel products by rerolling process. By these petitions under Article 226 of the Constitution the petitioners challenge the various orders and demand notices issued by the excise authorities.
3. In M.P. No. 851 of 1974 we are concerned with two periods. The first period is from 1st June, 1968 to 30th June, 1970 and the second period is from 1st July, 1970 to 17th May, 1971. A notice under Rule 10 of the Central Excise Rules was issued on 4th June, 1971 in respect of the first period making additional demands of tax. This notice is Annexure 1. The notice was served on the petitioner on 8th June, 1970.
4. The first contention raised by the learned Counsel for the petitioner in respect of the notice Annexure 1 is that in so far as the period prior to 8th June, 1970 the notice was barred by limitation. In our opinion this contention has to be accepted. Rule 10 read with Rule 173J prescribes a period of limitation of one year from the date on which the duty or charge was paid or adjusted in the owner's account current if any for taking proceedings for recovery of duties or charges short-levied by serving a notice on the person from whom the deficiency in duty or charges is or are recoverable. It is not disputed that the duty was paid before removal of the goods from the factory premises. The goods were removed from 1st June, 1968 to 30th June, 1970 which is the first period covered by the notice Annexure 1. As the notice was served on the petitioner on 8th June, 1971 it was clearly barred in respect of the period from 1st June, 1968 to 8th June, 1970. The notice was within limitation for the period from 9th June, 1970 to 30th June, 1970. The demand of difference in duty for the aforesaid period which became barred by limitation cannot, therefore, be sustained.
5. The second period relevant for M.P. No. 851 of 1974 is from 1st July, 1970 to 17th May, 1971. The demand notice in respect of this period is Annexure 3, dated 5th June, 1971 which was served on the petitioners on 8th June, 1971. The relevant period for M.P. No. 852 of 1974 is from 17th May, 1971 to 15th September, 1971. The notice demanding the difference in duty in this petition is Annexure I. In M.P. No. 145 of 1977 the periods covered are from 16th September, 1971 to 16th March, 1972 and from 17th March, 1972 to 31st August, 1972. The orders of the Assistant Collector confirming the demands for these periods are Annexures 3 and 4. The petitioners seek quashing of the aforesaid demand notices and the orders in appeal and revision confirming these notices in this petition.
6. A perusal of the notices and the various orders impugned in these petitioners go to show that the petitioners were allowed part exemption from payment of duty to the extent of Rs. 22 per metric tonne. This grant of part exemption was presumably under Notification No. 125/66-C.E., dated 6th August, 1968 as amended by Notification No. 198/67-C.E., dated 9th September, 1967. The petitioner's claim for complete exemption which was allowed to them at the time of removal of the goods was not accepted in the proceedings under Rule 10. That claim of complete exemption was based upon Notification No. 75/67-C.E., dated 20th May, 1967.
7. By Notification No. 75/67-C.E., dated 20th May, 1967 the Central Government exempted iron and steel products falling under Item No. 26AA of the First Schedule to the Central Excises and Salt Act if made from another article falling under the same item and on which the appropriate amount of the duty of excise or the additional duty under Section 2A of the Indian Tariff Act, 1934 as the case may be has been paid from so much of the duty of excise as is equivalent to the duty so paid on that article. It was held by the excise authorities that the words 'has been paid' as used in the notifications mean actual payment of duty and that before a person could claim exemption under this notification he was bound to prove that the duty on the raw material used was actually paid. Notification No. 125/66-C.E. which applies when the raw material used are old and used scrap or fresh unused rerollable scrap also uses the words 'amount of duty has already been paid' yet the benefit of the exemption under this notification was allowed to the petitioners without requiring the proof of payment of duty. Thus in applying Notification No. 125/66-C.E. the excise authorities thought that it was sufficient if the raw materials could have been subjected to payment of duty whereas for application of Notification No. 75/67 actual proof of payment of duty was required. In our opinion, there was no basis for making any such distinction in application of different notifications. The words 'has been paid' as used in these notifications do not in our opinion mean 'actually paid' but only mean 'ought to have been paid'. The raw materials used by the petitioners for re-rolling were not manufactured by them. The obligation to pay the appropriate amount of excise duty on the raw materials rested on the manufacturers of those raw materials. If the manufacturers had not paid the appropriate amount of duty the excise authorities should have recovered the duty from them. A purchaser has no control over the manufacturer in respect of his act relating to the payment of duty on the goods manufactured. Having regard to the scheme of the Rules relating to payment of excise duty it is clear to us that the words 'has been paid' as they are used in the notification do not mean actual payment of duty. In S.R. and Sons v. Union of India, 1972 Tax L.R. 1771 the Delhi High Court came to the conclusion that the words 'has already been paid' as used in Notification No. 296/63 30th November, 1963 meant ought to have been paid and not actually paid. We respectfully agree with this decision. The excise authorities were, therefore, in error in requiring the petitioners to furnish proof of actual payment of duty in respect of the raw materials used by them.
8. As earlier mentioned Notification No. 75/67 applies only when the raw material used fall within the description of the articles mentioned in Item No. 26AA. The other notification under which partial exemption has been granted to the petitioners applies when the raw materials used are old and used scrap or fresh unused rerollable scrap. The orders of the excise authorities do not make it clear as to what was the raw material used by the petitioners in the manufacture of flats. Before deciding the question as to whether Notification No. 75/67 or the other Notification applies it was necessary for the excise authorities to find out whether the raw materials used by the petitioners were articles mentioned in Item No. 26AA or not. This question was not considered by the authorities in the impugned orders. In these circumstances we feel that the cases ought to be remanded to the Superintendent, Central Excise, Raipur.
9. The petitions are allowed. The impugned demand notices and the orders passed in appeal and revision confirming the notices (Annexures 1, 3, 5, 7 and 9 in M.P. No. 851 of 1974, Annexures 1, 5, 7 and 9 in M.P. No. 852 of 1974 and Annexures 1, 2, 3, 4, 5, 6 and 7 in M.P. No. 145 of 1977) are quashed. The cases are reipanded to the Superintendent, Central Excise, Raipur in respect of all the periods except for the period from 1st June, 1968 to 8th June, 1970 who will pass appropriate orders afresh in accordance with law. There will be no order as to costs of these petitions. The security amount be refunded to the petitioners in all the petitions.