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Purushotham Gokuldas Plywood Co. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectExcise;Constitution
CourtKerala High Court
Decided On
Case NumberO.P. No. 997 of 1980-B
Judge
Reported in1985(4)ECC221; 1983LC973D(Kerala); 1983(14)ELT1677(Ker)
ActsCentral Excise Act; Constitution of India - Articles 14 and 226; Central Excise Rules - Rule 9
AppellantPurushotham Gokuldas Plywood Co.
RespondentUnion of India (Uoi) and ors.
Appellant Advocate T.C.N. Menon and; C.S. Balagangadharan, Advs.
Respondent Advocate P.V. Madhavan Nambiar, Adv.
Cases ReferredUnwin v. Hanson
Excerpt:
central excises & salt act, 1944, section 3 - ti/16bplywood - - ) at page 117 as follows :the proper test for classification of goods under appropriate specific entries and sub-entries is now judicially well settled. the test of being known in the market must be satisfied when excise is sought to be levied......the petitioner is a firm. it is manufacturing commercial plywood. it was paying excise duty under central excise act. according to the petitioner, commercial plywood manufactured and marketed by it will come under central excise tariff 16-b. it is said that commercial plywood is taxable at 20%. the explanation to tariff item 16-b states that eight items mentioned therein will not be commercial plywood. one of the items excluded from the main tariff item 16-b, is 'structural plywood' coming under clause (iv) of the explanation. the petitioner states that in view of notification that existed from time to time, and in particular notification nos. 15/68, 16/68, then 69/68 & 14/70 and until recently, the petitioner was paying excise duty at 20% for the plywood manufactured by it as.....
Judgment:

K.S. Paripoornan, J.

1. The petitioner is a firm. It is manufacturing commercial plywood. It was paying excise duty under Central Excise Act. According to the petitioner, commercial plywood manufactured and marketed by it will come under Central Excise Tariff 16-B. It is said that commercial plywood is taxable at 20%. The explanation to tariff item 16-B states that eight items mentioned therein will not be commercial plywood. One of the items excluded from the main tariff item 16-B, is 'structural plywood' coming under clause (iv) of the explanation. The petitioner states that in view of notification that existed from time to time, and in particular notification Nos. 15/68, 16/68, then 69/68 & 14/70 and until recently, the petitioner was paying excise duty at 20% for the plywood manufactured by it as 'commercial plywood' and not at the rate payable to 'structural plywood'. The respondents to this Original Petition are the Union of India, Collector of Customs and Central Excise, Cochin, the Assistant Collector of Central Excise, Kozhikode Division, and the Superintendent of Central Excise Baliapattom Range, Talap, Cannanore. It seems the respondents took the view that the commercial plywood manufactured by the petitioner is structural plywood coming under the tariff notifications and will attract the higher ad valorem duty at 30%. A communication dated 2-11-1979 evidenced by Ext. P12 was addressed by the Superintendent of Central Excise, Cannanore (4th respondent herein) to the petitioner to that effect. The petitioner was asked to submit the revised classification list. The petitioner filed an objection thereto evidenced by Ext. P13 dated 18-2-1980. Notwithstanding that, by Ext. PI4 communication dated 7-3-1980 the Assistant Collector of Central Excise, Kozhikode Division presumably placing reliance on trade notice No. 229/79, dated 30-10-1979 of the Collector of Customs and Central Excise, Cochin (Ext. PI 1), directed the petitioner to show cause as to why the classification should not be re-classified at structural plywood falling under item 16-B (2) attracting Central Excise duty at 30% ad valorem. The Superintendent of Central Excise on 15-3-1980 asked the petitioner to produce all sale invoices of shuttering plywood for the period from 1-11-1974 to 30-10-1979. Again the 4th respondent, the Superintendent of Central Excise sent a show cause notice dated 15-3-1980 evidenced by Ext. P16 to the petitioner stating that there is a short levy for the period from 1-11-1974 to 30-10-1979 of a sum of Rs. 5,39,406/21 and asked the petitioner to show cause as to why action cannot be taken in that regard. The petitioner filed his objections evidenced by Ext. PI 7, dated 22nd March, 1980. The petitioner has filed this writ petition praying that this Court may be pleased to quash Exts. PI 1, P12, P14, P15 and PI6 and also for the issue of a writ of mandamus directing the respondents to withdraw or forbear from acting in furtherance to Exts. PI 1, P12, P14, PI 5 and PI6 and for other reliefs. Various grounds are taken in the O.P. assailing the action of the respondents. The respondents have filed counter affidavits. The petitioner has also filed an amendment petition, C.M.P. No. 29350 of 1982, raising additional grounds, 20A and 20B, wherein it is stated that the threatened levy is also discriminatory and violative of Article 14 of the Constitution. A detailed affidavit has been filed on behalf of the respondents dated 18th January, 1983. An additional affidavit by the Additional Collector of Central Excise dated 11th of February, 1983 has also been filed. The petitioner has filed a reply affidavit dated 13th of April, 1983.

2. The main question that will fall for consideration in this case is whether the plywood manufactured and marketed by the petitioner is commercial plywood as contended by it or structural plywood as asserted by the Revenue. If the contention of the petitioner is accepted, the goods are to be taxed at the rate of 20% ad valorem duty whereas if the contention of the Revenue is accepted, it has to be taxed at 30% ad valorem. For determining as to whether the goods manufactured by the petitioner will fall within plywood simplicitor (commercial plywood) or structural plywood it requires investigation and appraisal of a large number of material and application of the relevant law to the case on hand. Whether an entry applies to a given article is, at least, a mixed question of law and fact. In these proceedings, what is available before court is only certain averments made by the petitioner and against it those made by the respondents. The materials before court are scanty. As to whether a particular item falls within a particular entry or not or as to whether it is covered by a particular entry to be taxed at a particular rate, the authorities have to find out, on the basis of relevant facts, how it is understood in 'common parlance' or 'in the commercial world' or in 'trade circles'. If the word used in the relevant entry is one of everyday use, it must be construed as understood in common parlance and it must be given its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it', [see State of West Bengal v. Washi, 39 S.T.C. 378 (SC.)] But, 'if the Act is one passed with reference to a particular trade, business, or transaction, and words are used which everybody conversant with that trade, business or transaction knows and understand to have a particular meaning in it, there the words are to be construed as having that particular meaning, though it may differ from the common or nary meaning of the words'. [Lord Ezhar M.R. in Unwin v. Hanson, (1891) 2 QB 115 at 119]. The test of commercial meaning has been aptly stated by V.J. Taraporevala and S.N. Parikh, in their book, the Law of Central Excise, (1979 Edn.) at page 117 as follows :-

'The proper test for classification of goods under appropriate specific entries and sub-entries is now judicially well settled. Goods which can be subjected to excise duty under a particular item or sub-item, are those which are known by the description in the market for a manufactured article, to fall under a particular item, it should be shown to be known by that description to the consumers and the commercial community. It is clear that meanings given to article in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. The test of being known in the market must be satisfied when excise is sought to be levied.'

Apart from assertions made by both sides, there is no material on various matters in issue. The respondents have taken objection in paragraph 9 of the counter affidavit, that the classification of a particular product is a pure question of fact and the matter requires a detailed investigation after the receipt of objections from the petitioner to the various show cause notices issued by the authorities. This may not be an entirely tenable contention. As I said earlier, whether an entry applies to a given article, is at least, a mixed question of law and fact. According to the respondents the writ petition is pre-mature and so the Original Petition itself is not maintainable.

3. On going through the O.P., the counter affidavits and reply affidavit, I am of the view that for a proper and fair adjudication of the various issues involved in this O.P. a detailed examination or investigation is necessary. As to whether the plywood called commercial plywood manufactured and marketed by the petitioner will be structural plywood is a matter to be adjudicated on the basis of tangible material. The revenue has also only asserted its case. But there seems to be no tangible material on record. In order to enable the authorities to come to a proper conclusion, it is necessary that there should be sufficient and proper material to find out, under what category the plywood manufactured by the petitioner will fall. Such material can be adduced by both the parties. Material or evidence can be in the form of affidavits or examination of persons who are conversant with the subject or of persons engaged in the trade or persons who are dealing with the subject-matter, competent persons who can speak about the subject, or the opinion of technical experts, or of opinions expressed in standard books on the subject. It may be in any one or more form and it depends upon the facts and circumstances of each case. The Department should inform the assessee the basis on which and the reasons why the Revenue is taking the view that the plywood manufactured by the assessee will be structural plywood. This is necessary because according to the petitioner the department was taking the view that the plywood manufactured by the assessee-petitioner is only 'commercial plywood' and will not be structural plywood but it was changed later. The petitioner asserts that the tariff entry regarding 'wood', embraces within its fold commercial plywood excluding structural plywood, and the entry was there throughout the relevant period without any alteration. Counsel for the petitioner submits that there is no change or alteration in the relevant entry in the commercial tariff to warrant a different conclusion as to state that the plywood manufactured by the petitioner is structural plywood. The petitioner has also got a case that Messrs Travancore Plywood Industries Ltd., a Government of Kerala undertaking, is also manufacturing similar product and there is no reason why the treatment meted out to that concern is not meted out to the petitioner. All these and other questions will depend upon investigation of facts and other relevant materials. Till the relevant facts are investigated and analysed, it will be difficult to come to a fair or proper conclusion under which tariff or entry the plywood manufactured by the petitioner will fall.

4. In these state of affairs it is not possible for this court at this stage to investigate and evaluate the very many questions of fact-some of them disputed-satisfactorily to arrive at a proper decision. Indeed, the jurisdiction under Article 226 of the Constitution cannot narily be exercised in such cases. So, in the interests of justice, I am of opinion, that the 3rd respondent should be directed to conduct an enquiry and investigate into the matter and decide under which customs tariff entry the plywood manufactured by the petitioner will fall. Any material or evidence gathered by the department and which it proposes to rely for corning to the conclusion, will be disclosed to the petitioner. The petitioner will also be given an effective and proper opportunity to lead its evidence to substantiate its case and if necessary to contradict the material adduced by the Revenue. The petitioner is directed to file detailed objections and the stand taken by it in the matter within six weeks from today. The petitioner will have the right to lead evidence by way of filing of affidavits, examination of persons or by filing petitions to summon proper persons for giving evidence in the matter and lead other relevant material. Till a proper investigation or adjudication is made and final orders are passed, there will be no recovery of any amount in pursuance to Ext. PI6 dated 15-3-1980.

5. This court has in C.M.P. No. 4382 of 1980 passed an interim order dated 27-3-1980 which was subsequently extended on 7-4-1980. According to that, regarding subsequent assessments the petitioner can take advantage of Rule 9(b). The same direction will continue until final orders are passed in this proceedings by the 2nd respondent. The disputed duty which was stayed pending the O.P. will not also be collectible till final orders are passed by the 2nd respondent. The O.P. is disposed of as above. There will be no order as to costs.

Issue carbon copies of this judgment to the counsel for the petitioner and to the counsel for the Revenue on usual terms.


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