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Light Roofings Ltd. Vs. Superintendent of Central Excise, Kancheepuram and Two ors. - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtChennai High Court
Decided On
Case NumberC.S. No. 199 of 1978 and W.P. No. 774 of 1980
Judge
Reported in1981(8)ELT738(Mad)
ActsCentral Excise Act - Sections 10A, 11A and 40; Constitution of India - Article 226
AppellantLight Roofings Ltd.
RespondentSuperintendent of Central Excise, Kancheepuram and Two ors.
Appellant AdvocateV.K. Thiruvenkatachari, ;V. Sridevan, ;R. Balachander and ;G. Masilamani, Advs.
Respondent AdvocateK.N. Balasubramanian, Senior Central Government Standing Counsel and ;K.M. Kodaiarasu, Adv.
Cases ReferredCollector of South Arcot v. Mask and Co.
Excerpt:
excise - liability to tax - sections 10a, 11a and 40 of central excise act and article 226 of constitution of india - whether finished product fall under tariff item no. 17 (4) - raw material for light roofing sheets is waste paper - all kinds of paper and paper boards not specifically provided in tariff item no. 17 (1) to 17 (3) fall under item no. 17 (4) -since all kinds of paper fall within item no. 17 (1) to 17 (3) the finished product which is paper product fall under item no. 17 (4) - government passed orders exempting asphaltic roofing sheets from item no. 17 (4) shows government decided that item falls under item no. 17 - proceedings not in continuation of earlier show cause notice - finished product is an item taxable under central excise tariff no. 17 (4). - - with full.....order1. this suit which was originally filed as o.s. no. 50 of 1978 on the file of the subordinate judge, chingleput, had been ordered to be transferred to the file of this court by natarajan j. as per the order dated 28-2-1978 made in appln no. 810 of 1978. accordingly the suit was withdrawn from the subordinate judge, chingelput, and taken on the file of this court as c.s. no. 199 of 1978. 2. the plaint allegations are as follows - the plaintiff 'light roofing ltd.', is a company incorporated under the companies act, 1956, having its registered office at no. 125 lloyds road, madras 86, and its factory is situate at chittipunyam village in chingleput district. 3. the first defendant is the assistant collector of central excise, vellore. the second defendant is the superintendent of.....
Judgment:
ORDER

1. This suit which was originally filed as O.S. No. 50 of 1978 on the file of the Subordinate Judge, Chingleput, had been ordered to be transferred to the file of this court by Natarajan J. as per the order dated 28-2-1978 made in Appln No. 810 of 1978. Accordingly the suit was withdrawn from the Subordinate Judge, Chingelput, and taken on the file of this court as C.S. No. 199 of 1978.

2. The plaint allegations are as follows - The plaintiff 'Light Roofing Ltd.', is a company incorporated under the Companies Act, 1956, having its registered office at No. 125 Lloyds Road, Madras 86, and its factory is situate at Chittipunyam village in Chingleput District.

3. The first defendant is the Assistant Collector of Central Excise, Vellore. The second defendant is the Superintendent of Central Excise, Kancheepuram and the third defendant is the Union of India, represented by the Secretary, Ministry of Finance, New Delhi.

4. The plaintiff had been manufacturing at its factory at Chettipuram village Chingleput district, asphalted roofing sheet (final product) for which the intermediate product is fibre mat. The factory has been in operation since 1969 and is working under L. 4 licence openly subject to excise supervision.

5. In the first stage of manufacture the plaintiff utilises the road picked waste paper, card board, craft paper, paper board, newsprint etc. which had been disposed of as waste. The plaintiff used to purchase there wastes from the contractors. These pickings so purchased are wetted and converted into pulp and thereafter made into sheets by rolling the same in the machine, then dried in sun and cut into requisite size. The sheet's normal size is 122 X 94 or 95 cm. and the weight thereof would be 1.6 kg. or 1.7 kg. At this stage the product is called 'fibre mat' but the authorities have been trying to term the same as 'mill board or paper board'.

6. The second stage is that this fibrous mat is wetted and corrugated by machine. In the corrugation, the length, 122 cm. would remain constant and the breadth of 94 or 95 cm. of the mat would get reduced to 72 cm. The corrugated sheet is then impregnated in hot liquefied asphalt for 15 minutes and then dried and thereafter finished with aluminium paint. This finished product viz. the roofing sheet of standard size 122 X 72 cm. by this time weighs 3.4 to 3.5 kg. The asphalt which the plaintiff used is 80/100 grade of Indian Oil Corporation which is the same article used for paving the roads and this process hardens to some extent the mat. This changes the colour from grey into dark black and the corrugated sheets are still flexible. The weight of the mat being 1.6 to 1.7 kg. and the weight of the roofing sheet being 3.4 to 3.5 kg. an additional weight of about 1.8 kg. is accounted for by the asphalt content. The asphalt content is, more than the fibre content in the roofing sheet. In other words, the roofing sheet contains about 53 per cent asphalt and 47 per cent the fibre mat, made from waste paper pulp. This type of roofing sheet is known in the international market as asphaltic roofing sheet. There are international standards for roofing sheets and the asphalt content is above 50 per cent in the roofing sheets.

7. By order dated 22-9-1975 the first defendant directed that the plaintiff should clear asphaltic roofing sheet on payment of duty under Tariff item 17(4) of the Central Excises and Salt Act. By order dated 10-10-1975, the Appellate Collector set aside the order dated 22-9-1975 specifically on the ground that the plaintiff had no opportunity of presenting its case that the roofing sheet did not fall under item 17 at all and asking the first defendant to pass a regular appealable order after following the principles of natural justice, by issuing a show cause notice and giving a hearing to the plaintiff. The plaintiff also filed W.P. 6287 of 1975 before this court against the orders of the first defendant and since the appeal was allowed by the Appellate Collector of Central Excise, a memo was filed on behalf of the Union of India to the effect that a fresh show cause notice was issued on 13-2-1978, as per the orders of the Appellate Collector and the plaintiff is at liberty to urge his contentions before the first defendant and the writ petition No. 6287 of 1975 relating to earlier order had become infructuous and the same may be dismissed. The first defendant issued a notice to show cause dated 13-2-1978, to the plaintiff which was served on the plaintiff at its factory at Chettipunyam village on 16-2-1978. In paragraph 4, it is stated that -

'The Government of India have classified light roofing under Tariff item 17(4) as could be seen from exemption notification No. 25/76, dated 9-2-1976'

and paragraph 5 thereof is as follows -

'Messrs Light Roofing Ltd., Chettipunyam village are therefore required to show cause as to why the dutiability nature of the light roofing sheets cleared from their factory prior to 9-2-1976 i.e. the date of issue of notification No. 25/76, dated 9-2-76 should not be decided.'

8. Item 17 of the Central Excises and Salt Act (Act 1 of 1944) as amended by the substitution of a new item therefore by the Finance Act, 1976, having effect from 1-3-1976. Since the present show cause notice relates only to goods, cleared from the factory prior to 9-2-1976, the item relevant to the period before 29-3-1976 applied to the cause which reads as follows :-

'Item 17. Paper, all sorts including paste board, mill board, straw board, and card board in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power - 1. Cigarette tissue Rs. three per kg.2. Blotting, toilet, garget, tissue other Rs. one and twentythan cigarette, tissue teleprinter, paise per kg.typewriting, manifold, bank, bond, artpaper, chrome paper, tubsized paper,cheque paper, stamp paper, cartridgepaper, waxed paper, polythylene coatedpaper, parchment and coated board(including art board, chrome board andfor playing cards)3. Printing and writing paper packing Sixty paise per kg.and wrapping paper, strawboard andpulpboard including grey board,corrugated board, duplex and triplexboards other sorts.4. All other kinds of paper and paper Rs. one and twentyboard not otherwise specified. paise per kg.'

9. At all relevant times, the first defendant was claiming the mat (intermediate product) was liable to duty under Item No. 17, and the first defendant never even suggested the contrary, namely, that the roofing sheets (final product) was excisable under item 17, until his order dated 22-9-1975. Neither the first defendant nor any of the authorities under the Act including the Union Government have any jurisdiction to decide whether roofing sheets fall under item 17(4) prior to 9-2-1976. The plaintiff has always been asserting that roofing sheets were not covered by item 17, relating to paper. The Appellate Collector had held on 10-10-1975 that the question could be decided only after hearing the plaintiff. The erroneous assumption in the Central Government notification dated 9-2-1976 does not and cannot make law. With full knowledge of the manufacture's case that neither the mats not roofing sheets were covered by item 17 relating to paper and also seeking that the first defendant as well as the Union Government were respondents in W.P. 6287 and 6858 of 1975 in the Madras High Court the ipse dixit of the Central Government that asphaltic roofing sheets fell under item 17(4) because of an exemption notification is contrary to natural justice, illegal, ultra vires and a nullity. It was obviously without notice or hearing or adjudication and being an exemption notification, the manufacturers had neither the right nor the necessity to litigate the matter in court. There were no counter affidavits filed in the writ petition. It was for the first time by the show cause notice dated 5-8-1977, issued to the plaintiff by first defendant that the claim was made by the defendants that roofing sheets cleared prior to 9-2-1976 were liable to excise duty under item 17(4).

10. The plaintiff entitled to a determination by the Civil Courts as to whether asphalted roofing sheets were 'paper' falling under item 17(4) prior to 9-2-1976 on evidence oral and documentary. The plaintiff is also entitled to a declaration that asphalted roofing sheets were not covered by item 17(4) prior to 9-2-1976 and to a permanent injunction restraining the defendants from claiming, imposing, levying or collecting any excise duty on roofing sheets cleared prior to 9-2-1976.

11. The action of the first defendant in issuing the show cause notice dated 13-2-1978 is mala fide and without good faith or honesty. The entire matter was pending in this court in W.P. 6287 and 6858 of 1975, which were filed in September and November 1975. The defendants never filed any counter affidavits at all and kept the threat of the remanded proceedings before the first defendant against the plaintiff till 20-2-1978. It is seen from the show cause notice dated 5-8-1977 that in the conference on 19/20-5-1975 it had been decided at Government level that mats were not taxable and that the asphalt dipped roofing sheets were classifiable under item 17(4) as they are specially treated as paper board and a Tariff advice dated 19-7-1975 had been issued to this effect. Considering that this Tariff decision and advice was issued in July 1975, which was before the filing of the writ petitions in September and November 1975, and the stay orders therein, it is significant that the respondent never brought the Tariff Advice to the notice of the High Court or the plaintiff, and never took any steps nor seek permission of the High Court to levy and collect duty on goods cleared prior to 9-2-1976. This claim was made for the first time in the show cause notice dated 5-8-1977, served while the writ petitions were pending. The plaintiff filed a supplemental affidavit in the High Court on 13-2-1978, setting out all its objections to the said show cause notice dated 5-8-1977 and 20-2-1978 the respondents abandoned the 5-8-1977 notice and had the writ petitions closed, reserving further proceedings on the fresh show cause notice dated 13-2-1978, subject to all defences by plaintiff.

12. The action of the first defendant in issuing the show cause notice dated 13-2-1978, is not an act done in good faith such as is referred to in sub section (1) of S. 40 of the Act and the same is mala fide and the first defendant had not acted honestly within the meaning of clause (22) of Section 3 of the General Clauses Act 10 of 1897. The plaintiff is therefore entitled to a declaration that the show cause notice dated 13-2-1978, is illegal, void, contrary to natural justice, barred by limitation, vitiated by mala fides and amount to initiating proceedings beyond the jurisdiction and competence of the first defendant and for permanent injunction restraining the first defendant from proceeding with the enquiry or taking any steps or passing any orders whatsoever pursuant to the said show cause notice. The reasons urged to show that the show cause notice dated 13-2-1978, is illegal are as follows :-

'(a) The order of Assistant Collector dated 22-9-1975 has to be quashed as a nullity and therefore the appellate order dated 10-10-1975, has also to be quashed in toto. Clause (3) of Art. 226 has no application to nullities such as orders violating natural justice.

(b) The direction in the Appellate order to re-examine the applicability of item 17(2) to roofing sheets is null and void and without jurisdiction and must be set aside.

(c) If a legal proceeding has been initiated by a show cause notice like the show cause notice dated 21-9-1974, to adjudicate liability of mats-intermediate product to duty under item 17(2) - then there would be a pending proceeding. If the final order therein is set aside then the authority can continue the pending proceeding on the basis that it was yet to be disposed of. In the instant case, there was no show cause notice to adjudicate liability of roofing sheets under item 17. The order dated 22-9-1975 was a direction to clear roofing sheets on payment of duty under item 17 for the future, that is, clearances made after 22-9-1975, when it is found that the order dated 22-9-1975 is a nullity, there is no proceeding pending which could be continued before the Assistant Collector. Hence the appellate direction is illegal and void and is liable to be quashed.

(d) The show cause notice dated 5-8-1977 is also illegal and void for other reasons also. The statement therein that is issued as per directions of the Appellate Collector in his order dated 10-10-1975, is not correct. The 10-10-1975 order clearly stated that the very question whether or not asphaltic roofing sheets fell under item 17(2) should be decided by the Assistant Collector after hearing the petitioner.

(e) The show cause notice in para 5 requires the petitioner to show cause as to why the duty should not be demanded on the light roofing sheets cleared from the factory prior to 9-2-1976 i.e., from the date of the issue of the notification No. 25/76, dated 9-2-1976.

(f) Right upto 19/23-9-1975, and even thereafter under that very order, the department was claiming duty under item 17 on the mats and not on the roofing sheets. The 10-10-1975 order directed an enquiry whether or not roofing sheets are liable under item 17 and the petitioner has already made the submission that this direction was illegal and void. But in any event this direction does not justify the show cause notice for re-assessment on basis of short levy for a prior period.

(g) The show cause notice has pre-determined the very question in issue whether at all roofing sheets fall under item 17 by the assertion in para 4 that 'the Government of India have classified light roofing under Tariff item No. 17(4) as could be seen from the exemption notification No. 25/76, dated 9-2-1976' and does not allow any hearing on the question whether or not roofing sheets fell under item 17(4) or (2). The petitioner has always been contending that neither mats nor roofing sheets can fall under item 17 at all which relates to paper board etc. Therefore this notice has nothing to do with the direction is the order dated 10-10-1976.

(h) The Assistant Collector and higher authorities including Government of India have disqualified themselves from authority or competence to adjudicate the question of liability to duty or roofing sheets under item 17 by the exparte ipse dixit of the Government of India in the notification No. 25/76 dated 16-3-1976. In the said notification the Government states it is exempting asphaltic roofing sheets falling under item 17(4)/(2) of the First Schedule to Act 1 of 1944, from the whole of the duty of excise leviable thereunder. The petitioner had no opportunity of being heard and also could not question the decision as it was an exemption order. If and when the question of liability is properly raised in a proceeding for recovering alleged short levies for any period before 9-2-1976, the assessee is entitled to question the liability on the basis that roofing sheets do not fall and never fell under item 17(4)/(2) and to have the question determined either in a suit or if permitted in proceedings under Art. 226.

(j) The show cause notice dated 5-8-1977 raises the matter of recovery of alleged short levy prior to 9-2-1976, for the first time. Under rule 10 under which only such action can be taken, the demand can be only in respect of a period of one year immediately preceding 5-8-1977, i.e., for any duty due but not levied or short levied in respect of clearances on or after 6-8-1976. Starting from 9-2-1976 the exemption notification was in operation and there is no scope for any short levy determination on the basis of the show cause notice dated 5-8-1977.

(k) The notice is vague as to period in para 5 by merely referring to duty on sheets cleared prior to 9-2-1976. The petitioner has reason to believe it is deliberately vague. All the time upto and including the order dated 19/23-9-75 and thereafter, the demand was for duty on mats and therefore no demand of duty on the roofing sheets. In the face of that statement and the remanded enquiry for duty on mats, the Excise department cannot say that there was non-levy or short levy of duty on roofing sheets as to which there was never any claim by the department till the void order dated 22-9-1975.'

The plaintiff therefore prays for a declaration that -

(1) the Asphalted roofing sheets were not covered by item 17(4) prior to 9-2-1976 or 29-2-1976;

(2) the show cause notice dated 13-2-1978 is illegal, void, and contrary to natural justice, barred by limitation and beyond the jurisdiction and competence of the first defendant. The plaintiff also prayed for a consequential injunction.

13. The defendants 1 and 2 filed a common written statement raising the following contentions :

The allegation that the show cause notice dated 13-2-1978 was issued to the plaintiff and the same was served on the plaintiff on 16-2-1978 is not admitted. From the records it is seen that the notice was issued to the plaintiff on 30-1-1978, asking the plaintiff to show cause why the liability to duty on light roofing sheets cleared from the plaintiff's factory prior to 9-2-1976 i.e., the date of notification No. 25/76 should not be decided. This was a notice issued in continuation of proceedings which had been remanded to the first defendant by the Appellate Collector, Central Excise. The plaintiff caused a reply to be sent on 22-2-1978 informing the defendants that the would be filing a suit. The two writ petitions Nos. 6287 of 1975 and 6858 of 1975, were dismissed by this court on 20-2-1978, as infructuous.

The plaintiff had been manufacturing roofing sheets under L. 4 licence from 1969 is admitted. The process of manufacturing roofing sheets as set out in paragraphs 8 and 9 of the plaint are not correct. On the basis of a visit by the technical men of the Central Excise department the process of manufacture is as follows -

Street sweeping collected through various dealers are brought to the factory and the same is converted into pulp with the help of a rough hammer mill. The pulp then undergoes refining in a refiner mill. The refined pulp is sent to the moulding machine where the pulp is converted into mats. These mats are in a wet condition having about 55 to 60 per cent moisture. These mats are then spread in the open yard to dry under the sun. At this stage, the mats are very flexible and porus which allow quick easy absorption of asphalt at a later process of impregnation. The sun dried mats are trimmed and corrugated and dipped in asphalt solution. After the sun drying and before the boards are trimmed, the completion of the commodity 'paper' takes place. It is later that these boards are impregnated with asphalt solution and finally aluminium paint is coated over the surface and the product is called light roofing material.

The name given by the plaintiff after rolling and cutting the paper pulp, as fibre mats is immaterial, irrelevant and not germane for the purposes of the Excise Act. They are paper board within the meaning of the Central Excise Tariff even after drying and more so when it is marketed as roofing material. It is liable to duty under item 17(3) or 17(4) of the Central Excise Tariff. On 24-3-1970, the Assistant Collector of Central Excise, Madras, after referring to a letter written by the plaintiff to the Range Officer, Central Excise, Kancheepuram, informed the plaintiff that the goods manufactured by them even before they are impregnated with asphalt fall within the ambit of Tariff item No. 17 and that the plaintiff should take out a licence for the manufacture of this product under Rule 174 of the Central Excise Rules, 1944, and pay the duty involved in the clearance of such boards. Thereupon the plaintiff filed a writ petition No. 1873 of 1970 on the file of this court to quash the orders made on 24-3-1970. This writ petition was allowed by this court by its judgment dated 7-3-1972. This court held that in view of the fact that the order in question had been passed by the Assistant Collector of Central Excise, Madras II Division without giving any reason as to how the article has been treated as coming within the definition of mill board, i.e., the item described as paper in Central Excise Tariff, in view of the fact that the plaintiff also did not have sufficient opportunity to explain its stand before the authorities, the matter has to be considered afresh by the Assistant Collector after giving an opportunity to the plaintiff to produce the requisite material to sustain the plea that the Board brought into existence by them in the course of production of the ultimate product of roofing material is not a mill board. The department was directed to consider the matter afresh after going through the relevant circumstances and the material to be placed by the plaintiff. This court expressly refrained from expressing its opinion on the question as to whether the articles produced by the plaintiff will come under the definition of paper in item 17(3) of the Excise Tariff. After the judgment of this court dated 7-3-1972, the first defendant issued a notice to show cause to the plaintiff on 7-9-1972. According to the directions of this court, the copies of the two reports of the Chemical Examiner were given to the plaintiffs on 20-2-1973. The plaintiff ultimately sent an explanation on 2-4-1974. The plaintiff sought for a personal hearing in the matter and after giving an opportunity the first defendant passed the order dated 18-8-1975 that an excisable product is manufactured by the plaintiff even before the final commodity called 'light roofing' is produced.

Against the order dated 18-8-1975, the plaintiff filed an appeal on 1-9-1975, to the Appellate Collector of Central Excise, Madras. The order in appeal is dated 19-9-1975. Before the Appellate authority the plaintiff contended that the intermediary product called by them fibrous mat or board is not at all goods and has no market by itself. The Appellate Authority observed that the process of manufacture and marketing of finished goods has not been gone into in detail and remanded the appeal.

The plaintiff thereupon filed writ petition No. 6858 of 1975, against the appellate order dated 19/23-9-1975 in App. No. 319/75 before the Appellate Collector, Central Excise, Madras, for issue of writ of certiorarified Mandamus quashing the order. The plaintiff also filed a writ petition No. 6827 of 1975 against the order which was made on 22-9-1975, by the first defendant that the light roofing sheets themselves are paper boards within the meaning of the Central Excise Tariff and calling upon the plaintiff to pay duty after the clearance of the finished product. The order dated 22-9-1975, against which W.P. 6287 of 1975 was filed was made in pursuance of the appellate order dated 19-9-1975.

The appellate order dated 19-9-1975 set aside the order dated 18-8-1975 and directed the first defendant to examine afresh the issue after giving proper opportunity to the plaintiff to explain their view points. It was then discovered that light roofing itself is a paper board falling within tariff item and should be subjected to excise duty. These writ petitions were finally dismissed as infructuous since the original order was set aside by the Appellate Collector. The writ petition relating to the order dated 22-9-1975 was also dismissed as infructuous for the reason that in the proceedings that had been taken before the original authority the plaintiff would have sufficient opportunity to represent their point of view. The show cause notice was issued on 13-2-1978. The plaintiff has now filed the suit for declaratory reliefs. The point at which duty is payable and the commodity on which duty is to be paid are the subject of all these inquiry proceedings, before the first defendant. The proceedings were initiated in 1970 itself and was remanded either by this court or the appellate authority for examination and on re-examination it was found that what was called roofing sheet was a paper board and that duty was payable by weight. The proceedings had left the matter at large for investigation.

The allegation that the first defendant nor any of the authorities under the Act including the Union Government has any jurisdiction to decide that the roofing sheets fell under item 17(4) prior to 1976 is not correct. The first defendant alone under the Excise Act have jurisdiction to decide under what item of the Central Excise Tariff, the goods manufactured should be classified. The Civil Court has no jurisdiction to decide the issue. The allegation that the notification dated 9-2-1976 of the Central Government is based upon an erroneous assumption is denied. The notification prima facie entitles the defendants to treat the goods known also as light roofing material as 'paper board'. It also means that the Union Government at the higher statutory level have examined the position in respect of manufacturing similar goods and had taken the decision that it is paper board within the meaning of item 17 of the Excise Tariff. It is incorrect to state that the Union Government, on account of the writ petition Nos. 6287 and 6858 of 1975 should not decide the question vis-a-vis all manufacturers. It is not correct to state that the view of the Central Government to merely an impose dixit. All classifications under the Central Excise Act are decided by Central Government on investigation and the general representation of manufacturers and after considering the manufacturing process. It is a decision taken by the Central Government and is within the scope of its powers. The allegation that the exemption notification is contrary to natural justice or that it is illegal or ultra vires are not correct. The allegation that the exemption notification should be with notice to manufacturers generally or to the plaintiff in particular is not correct. If the plaintiff wants to contend that the goods that it manufacturers do not fall within the scope of the excise tariff the plaintiff must raise its contentions before the authority concerned. It is not correct to state that the show cause notice dated 5-8-1977 for the first time claimed that roofing sheets cleared prior to 9-2-1976 were liable to excise duty under item 17(4).

The civil court has no jurisdiction to entertain the suit since it relates to the matters of revenue and hence the suit is not maintainable. The decision on such classification of Excise Tariff and item under which any excisable goods fall is solely under the jurisdiction and power of the statutory authorities.

The allegation that the first defendant acted mala fide and without good faith or honesty in issuing the show cause notice dated 13-2-1978 is denied. It is incorrect to state that the notice dated 5-8-1977 was abandoned. The allegation that the tariff notice was not brought to the notice of the High Court in W.P. 6287 and 6858 of 1975, is not correct. It is incorrect to state that the first defendant should take permission from the High Court to determine the liability of goods to excise duty manufactured and cleared prior to 9-2-1976.

The notice dated 13-2-1978 was issued in good faith and was not mala fide in any sense much less within the meaning of the General Clauses Act. The allegation that the notice dated 13-2-1978 is illegal, void or contrary to justice is also not correct. It is not barred by limitation. It is within the competence and jurisdiction of the first defendant.

The notice dated 5-8-1977 is also not void or illegal. The enquiry was on the applicability of the Excise duty on the goods and the kind of goods manufactured by the plaintiff. The allegation that the show cause notice had pre-determined the issue, is denied. The notice dated 13-2-1978 is a continuation of the earlier proceedings from higher authorities on remand. The allegation that the defendants have disqualified themselves is incorrect and denied.

The allegation that the show cause notice dated 5-8-1977 is barred by limitation is also incorrect. The show cause notice, now in force, dated 13-2-1978 is a continuation of the proceedings initiated in 1970 and is valid. No question of limitation will arise. The allegation that the remanded enquiry should be confined to the commodity described as mats and should not proceed in respect of the manufactured goods is denied and is not sustainable.

The suit is not maintainable in the absence of a notice under S. 80 of C.P. Code, and that sub-section (2) of S. 80 will not apply. The defendants therefore pray for the dismissal of the above suit.

14. On these pleadings, the following issues were framed -

1. Whether the plaintiff is entitled to the declaration that asphalted roofing sheets were not covered by tariff item 17(4)

2. Whether the plaintiff is entitled to a permanent injunction restraining the defendants from levying or collecting the excise duty on roofing sheets

3. Whether the plaintiff is entitled to the declaration that the show cause notice dated 13-2-1978 is illegal

4. Whether the claim by the defendant is in time

5. To what relief the plaintiff is entitled

W.P. 774 of 1980 : In the affidavit in support of the writ petition No. 774 of 1980, sworn to by one Mr. Santhanakrishnan, Chief Accountant of the plaintiff company, the allegations in the plaint are repeated. The reasons for filing of the writ petition are given in paragraphs 12, 13 and 14 of the affidavit in addition to the repetition of the allegations made in the plaint. The respondents in the writ petition filed a written statement in the above suit after a delay of nearly 500 days contending inter alia that the civil court has no jurisdiction to entertain the above suit which pertains the matters of revenue and that it was for the authorities under the Act to decide the various issues raised by the plaintiff.

15. At the time, when the suit was filed, Art. 226 of the Constitution of India was amended by the 42nd Amendment of the Constitution. Now, from 1-8-1979, the old Art 226 was restored by the 44th Amendment to the Constitution of India. The case for the plaintiff to file the writ petition arose only after the respondents filed a belated written statement in C.S. 199 of 1978 in December 1979 and objected to the maintainability of the suit. The plaintiff filed the above suit while the 42nd Amendment was in operation with limits on the jurisdiction of the High Court under Art 226 of the Constitution of India. Now those limits have been removed by the 44th Amendment. Without admitting the validity of the objections to the maintainability of the suit, the plaintiff has been advised to file this writ petition so that this court can go into and decide the merits of the case on one or the other proceedings.

16. The revised show cause notice issued by the defendant on 13-2-1978 is illegal, barred by limitation mala fide and without jurisdiction for the following among other grounds -

(a) The order of the Assistant Collector dated 22-9-1975 has to be quashed as a nullity and therefore the appellate order dated 10-10-1975, has also to be quashed in toto. Clause (3) of Art. 226 has no application to nullities such as order violating natural justice.

(b) The direction in the appellate order to re-examine the applicability of item 17(2) to roofing sheets is null and void and without jurisdiction and must be set aside.

(c) If a legal proceeding has been initiated by a show cause notice like the show cause notice dated 21-2-1974 to adjudicate liability of mats intermediary product to duty under item 17(2), then there would be a pending proceeding. If the final order therein is set aside, then the authority can continue the pending proceedings on the basis that it was yet to be disposed of. In the instant case, there was no show cause notice to adjudicate liability of roofing sheets under item 17. The order dated 22-9-1975 was a direction to clear roofing sheets on payment of duty under item 17 for the future, that is clearance made after 22-9-1975 when it is found that the order dated 22-9-1975 is a nullity, there is no proceedings pending which could be continued before the Assistant Collector. Hence the appellate direction is illegal and void and is liable to be quashed.

(d) The show cause notice dated 5-8-1977 is also illegal, and void for other reasons also. The statement therein that it is issued as per directions of Appellate Collector in his order dated 10-10-1975 is not correct. The 10-10-1975 order clearly stated that the very question whether or not asphaltic roofing sheets fell under item 17 should be decided by the Assistant Collector after hearing the petitioner.

(e) The show cause notice in para 5 requires the petitioner to show cause as to why the duty should not be demanded on the light roofing sheets cleared from the factory prior to 9-2-1976 i.e. from the date of the issue of the notification No. 25/76, dated 9-2-1976.

(f) Right upto 19/23-9-1975 and even thereafter under the very order, the department was claiming duty under item 17 on the mats and not on the roofing sheets. The 10-10-1975 order directed an enquiry whether or not roofing sheets are liable under item 17 and the plaintiff has already made the submission that this direction was illegal and void. But in any event this direction does not justify a show cause notice for re-assessment on the basis of short levy for a prior period.

(g) The show cause notice has pre-determined the very question in issue whether at all roofing sheets fall under item 17 by the assertion in paragraph 4, that 'the Government of India have classified light roofing under Tariff Item No. 17(4) as could be seen from the exemption notification No. 25/76, dated 9-2-1976' and does not allow any bearing on the question whether or not roofing sheets fall under item 17(4) or (2). The plaintiff has always been contending that neither mats nor roofing sheets can fall under item 17 at all which relates to paper and paper boards etc. Therefore, this notice has nothing to do with the direction in the order dated 10-10-1975.

(h) The Assistant Collector and higher authorities including Government of India have disqualified themselves from authority or competence to adjudicate the question of liability to duty of roofing sheets under item 17 by the exparte ipse dixit of the Government of India in the notification Nos. 25/76, dated 9-2-1976 and 72/76, dated 16-3-1976. It is in the said notifications the Government states that it is exempting asphaltic roofing sheets falling under item 17(4)(2) of the First Schedule to Act 1 of 1944 from the whole of the duty of excise leviable thereunder. The plaintiff had no opportunity of being heard and also could not question the decision as it was an exemption order. If and when the question of liability is properly raised in a proceeding for recovering alleged short levies for any period before 9-2-1976 the assessee is entitled to question the liability on the basis the roofing sheets do not fall and never fall under item 17(4)(2) and to have the question determined either in a suit of if permitted in proceedings under Art 226.

(j) The show cause notice dated 5-8-1977 raises the matter of recovery of alleged short levy prior to 9-2-1976 for the first time. Under Rule 10 under which only such action can be taken, the demand can be only in respect of a period of one year immediately preceding 5-8-1977 i.e. for any duty due but not levied in respect of clearances on or after 6-8-1976. Starting from 9-2-1976, the exemption notification was in operation and there is no scope for any short levy determination on the basis of the show cause notice dated 5-8-1977.

(k) The notice is vague as to period in para 5 by merely referring to duty on sheets cleared prior to 9-2-1976. The petitioner has reason to believe it is deliberately vague. All the time upto and including the order dated 19/23-9-1975 and thereafter the demand was for duty on mats and therefore no demand of duty on the roofing sheets. In the face of that statement and the remanded enquiry for duty on mats, the Excise department cannot say that there was non-levy or short levy of duty on roofing sheets as to which there was never any claim by the department till the void order dated 22-9-1975.

(l) The proposed reassessment violates Art. 226 of the constitution of India, because it is without authority of law. The Act and rules do not permit reassessment after 3 months or 6 months, as the case may be, vide rule 10 of the Central Excise and Salt Act.

The petitioner (the plaintiff in the above suit) therefore prays for the issue of a writ of certiorarified mandamus or any other appropriate writ quashing the proceedings of the second respondent dated 30-1-1978/13-2-1978 in C. No. V/17/30/6/76 T. 2 and restraining the respondents (the defendants in the above suit) from levying or collecting the Central Excise duty on the finished product of the roofing sheets of the petitioner prior to 9-2-1976.

17. In the counter affidavit filed by the second respondent on behalf of the respondents the following averments are made : The second respondent adopts the written statement filed on behalf of the defendants in C.S. 199 of 1978 on the file of this court as part and parcel of the counter affidavit in the writ petition.

The Commissioner's report filed in C.S. 199 of 1978 shows that the product of the petitioner, viz, light roofing material is only a paper board by whatever the petitioner called it. Even at the stage of fibrous mat it is paper board. Even after impregnating the fibrous flexible material with asphalt and aluminium paint the roofing sheets continue to be paper board. The pricing of the petitioner of his commodity is immaterial and irrelevant. The fact that the petitioner manufactures a cheap non-durable substitute for asbestos sheets and therefore his poor quality roofing should not be subject to heavier excise duty than asbestos and that there should therefore be a lesser rate of duty are beyond the scope of this writ petition. The Parliament in its wisdom fixes duty. The department only levies duty. If the duty is uneconomic burden the petitioner's remedy is elsewhere than in courts under Art 226 of the Constitution of India.

On 24th March, 1970, the department sought to levy duty on fibre mats as mill board. These proceedings were commenced by notice dated 24th March, 1970. The petitioner filed W.P. No. 1873 of 1970. The proceedings were set aside and remitted to the department. In continuation on 7-9-1972, again a show cause notice was issued. In answer to the show cause notice the plaintiff contended that the product do not fall under item 17 of the Central Excise Tariff, but the plaintiff's contention was not upheld. There was an appeal to the Appellate Collector. The Appellate Collector by his order remanded the matter for re-examination to the Assistant Collector. In the meantime the petitioner was asked to clear light roofing sheets after payment of Central Excise duty. Against this levy the petitioner filed W.P. 6288 of 1975. Against the order of remittal by the Appellate Collector W.P. 6858 was filed. At the final hearing these writ petitions were not pressed. The respondents are not aware of the proceedings in court except those on record. On 13-2-1978, a show cause notice in continuation of the prior show cause notice but amending the same had been issued. In view of that the writ petitions were dismissed.

The allegations that the show cause notice dated 13-2-1978 is illegal, barred by limitation, mala fide and without jurisdiction are without basis. The allegation that the order of the Assistant Collector was quashed as a nullity and therefore the order dated 10-10-1975 is a nullity is denied. The reference to Art. 226(3) has no relevance.

The allegation that the appellate order to re-examine the applicability of the item 17 of the Central Excise Tariff is not null and void as the writ petition thereon has been dismissed.

The allegation in paragraph 14(c) that the order dated 22-9-1975 calling upon the petitioner to clear the goods on payment of duty is not a nullity for the writ petition thereon has been dismissed.

The allegation in paragraph 14(e) that the show cause notice dated 13-2-1978 seeks to levy duty prior to 9-2-1976 and this is not justified is denied. There was no pre-determination of any question as is stated in paragraph 14(g). The allegation that the Assistant Collector and his authorities (whatever is meant by that) including the Government of India have disqualified themselves in incorrect. The performance of a statutory authority is not like a game of sport and no statutory authority by office can disqualify himself, except in cases when there is a personal interest in favour of the incumbent which amounts to a bias.

The show cause notice dated 5-8-1977 being a notice in continuation of the proceedings commenced in 1970 and hence no question of limitation will arise. The applicability of Rule 10 cannot be ruled out No duty is demanded after 9-2-1976, the date of exemption.

The allegation of illegality pleaded in paragraph 14(k) and the allegation of unconstitutionality in paragraph 14(l) of the affidavit are denied.

The writ petition is not maintainable and is premature and even on that ground alone the writ petition will have to be dismissed.

The point for determination in the writ petition is whether the plaintiff, viz. the petitioners in the writ petition is entitled to a writ of certiorarified mandamus or any other appropriate writ quashing the proceedings of the second respondent dated 30-1-1978/13-2-78 in C. No. V/17/30/6/76 T. 2.

18. The above suit is filed for declaration that -

(a) the asphalted roofing sheets manufactured by the plaintiff were not covered by item 17(4) prior to 9-2-1976;

(b) the show cause notice dated 13-2-1978 is illegal, void and contrary to natural justice, barred by limitation, vitiated by mala fides and beyond the jurisdiction of the first defendant;

(c) for permanent injunction restraining the defendants from claiming, imposing, levying or collecting any excise duty on roofing sheets or light roofing sheets cleared prior to 9-2-1976;

(d) for a permanent injunction restraining the first defendant from proceeding with the enquiry or taking steps or passing any orders in pursuance of the show cause notice dated 13-2-1978.

19. W.P. No. 774 of 1980 is filed for the issue of a writ of certiorarified mandamus quashing the proceedings of the second respondent dated 30-1-1978/13-2-1978 in C. No. V/17/30/6/76 T. 2 and for restraining the respondents from levying or collecting the Central Excise duty on the finished product of the roofing sheets manufactured by the petitioner prior to 9-2-1976. The above said proceedings of the second respondent resulted in issue of the show cause notice dated 13-2-1978.

20. The relief claimed in the suit and the relief claimed in the writ petition relate to the same subject matter and hence both the suit and writ petition are tried together in order to avoid multiplicity of findings. Before proceeding to discuss the issues in the suit relating to the notification made by the second defendant bearing the date 30-1-1978 and signed on 3-2-1978, marked as Ex. P. 1, directing the plaintiff to show cause why the excise duty should not be levied on the product of light roofing manufactured and cleared by the plaintiff prior to 9-2-1976, the details regarding the manufacture of light roofing material and the several attempts made by the second defendant to levy excise duty on the material will have to be set out for a better under standing of the case.

21. A Commissioner was appointed as per the orders of this court in Appln. No. 208 of 1979 to inspect the factory premises of the plaintiff located in Chettipunniyam village, Chingleput district, and submit a report about the details of the manufacture of the light-roofing sheets. The report of the Commissioner is marked as Ex. C. 1. The manufacturing process is set out in the Commissioner's report and in the several statements filed by the plaintiff before the second defendant in earlier proceedings.

22. Road pickings of waste paper forms the raw material, this includes various types of paper products like card board, newsprint etc. The paper is separated from plastic rags and other items of refuse. The latter are burned while the paper is soaked in tanks of water from 5 to 10 minutes and fed into two hammer mills consecutively for pulverisation (a purely mechanical process) and the end the paper comes out in a fine suspension of paper pulp fibres. The pulverised paper is then passed over a forming machine with rollers where the water is pressed out the paper fibres come out in connected layers to form a multilayered fibrous mat 2.5 mm in thickness. The thickness is adjustable. The fibrous mats are dried in the sun for six hours. Three samples were taken of the fibrous mat and is marked as Ex. A by the Commissioner. The edges of the dried mats are cut so that each mat has a length of 48' and width of 38'. The waste is rejected. The dried mats were then taken to the corrugation section after slight moistering, inserted into a pneumatic corrugation machine for about a minute with a hot oven underneath. Sample of corrugated sheet is marked as Ex. B by the Commissioner.

23. The corrugated sheets later have been impregnated in asphaltor bitumen, a petroleum product commonly termed tar and used for laying roads. After immersion for 30 to 40 minutes in tanks containing bitumen at 170 degree C in baskets containing 70 to 80 sheets. The sheets are taken out, ends wiped and dried in open air for an hour. The impregnated sheets are marked as Ex. C by the Commissioner Later the impregnated asphalt roofing sheets were taken to the painting section and painted by hand with aluminium paste purchased from the market. The samples of the painted sheets are marked as Ex. D by the Commissioner. Ex. D represents the end product which is marked at varying prices depending on the weight and thickness of the sheets. The end product is called light roofing asphaltic corrugated sheets and is said to last for ten years and is also termed non-durable. The entire process of manufacture is mechanical. There is no controversy with regard to the details of the report of the Commissioner regarding the process of manufacture.

24. The plaintiff has been manufacturing the above said light roofing material from the year 1969 onwards. The product manufactured by the plaintiff attracted the attention of the second defendant even in the year 1969. By means of a letter bearing O.C. No. 397/70 dated 20-2-1970, marked as Ex. P. 4, the second defendant informed the plaintiff that the mill boards manufactured by M/s. Light Roofings Ltd. at Chettipunniam village are assessable to Central Excises duty at the board stage itself under tariff item No. 17(3) applicable to mill boards. The manufacturer of mill boards without the Central excise licence is in contravention of the Central Excise Rules and the plaintiff was requested to apply for the Central excise licence. The plaintiff was also directed by the second defendant to make available the records to the Central Excise Range Officer at Kancheepuram to enable him to collect duty involved on the mill boards manufactured so far and cleared by the factory without payment of Central Excise duty.

25. As against this registered notice P. 4, the plaintiff filed the writ petition W.P. No. 1873 of 1970 on the file of this court for issue of a writ of certiorari calling for the records on the file of the second defendant in his O.C. No. 397/70 dated 20-2-1970, and for quashing the same. In the said writ petition the plaintiff herein contended that 'mill board' under the notification of the Central Excise Act means 'any unbleached homogeneous board having a thickness exceeding 0.50 millimeters and made (a) out of mixed waste papers with or without screening and mechanical pulp, but without any colouring matter being added thereto, and (b) on an intermittent board machine the process of drying the wet board being distinct process carried out without the aid of the same machine on which the board is formed. The intermediate product with reference to which the notice Ex. P. 4 was issued will not fit in with the definition of mill-board occurring in the notification for the following reasons :

(a) In order to come within the definition of mill-board the board should be smooth and hard so as to avoid warping and the intermediate product of the plaintiff i.e., the mat or board made out of the pulp from the road picked waste paper being rough and soft so as to facilitate corrugation and it cannot be brought under the definition of 'mill-board';

(b) The mill-board has got special significance in the market and the intermediate product of the plaintiff is not saleable either as a card board or as a mill board in the market.

(c) The order as per Ref. C.C. No. 397/70 dated 20-2-1970 of the second defendant was passed without giving any opportunity to the plaintiff to explain their stand that the intermediary product cannot be called a 'mill board'.

This court allowed the writ petition W.P. 1873 of 1970 and directed the second defendant to consider the matter a fresh after going through the relevant circumstances and the materials to be placed by the plaintiff. Ex. P. 5 is the fair order passed by a Bench of this court in W.P. No. 1873 of 1970.

26. Subsequent to the decision in the above said writ petition the first defendant issued a show cause notice as per his Ref. C. No. 17/3/1/72 dated 7-9-1972, directing the plaintiff to show cause why the produce manufactured by the plaintiff, viz., mill board should not be treated as excisable under item No. 17 of the Central Excises and Salt Act, 1944 and why the said manufacture should not be brought under excise control under rules 173F and 174 of the Central Excise Rules, 1944. The plaintiff was asked to indicate in the written explanation whether they want to avail the opportunity of personal hearing. Ex. P. 6 is the show cause notice issued by the first defendant as per Ref. No. C.V. 17/3/1/72 dated 7-9-1972. The objections made by the plaintiff to the first defendant with reference to the show cause notice Ex. P. 6 is marked as Ex. P. 7. The main contentions of the plaintiff in its objections are as follows :-

1. The term mill board under which the intermediary product is sought to be classified means hard board rolled with high pressure used for binding and the intermediary produce cannot be called a mill board;

2. The following differences in the meaning between mill board and straw board in several dictionaries were pointed out :

-----------------------------------------------------------------Mill Board Straw Board-----------------------------------------------------------------Webster Third Strong heavy paper board Board made of strawNew suitable for lining book pulp and commonlyInternational covers and for panelling used for packing andDictionary in furniture box makingIn Funk and Heavy paste board used Coarse board madeMagnalis for the covers of books, of straw used forStandard invitation press board paper boxes and bookdictionary coversShorter Oxford A kind of stout paste Coarse yellow millEnglish board rolled with high board from straw pulpdictionary pressure, used forbinding etc. as pieceof thisCompact edition A kind of stout board Coarse yellow millof the Oxford made of pulp of old rope board made from strawEnglish sacking, paper and other pulp used for makingdictionary coarse matter and milled boxes, box covers etc.or rolled with highpressure. Also a board orpiece of this material.Mill Board are thethickest sort of pasteboard used by bookbinders for the coveringof the booksA Glossary Tough, heavy boards A grade of Boardcompiled by produced on wet machines composed ofWilliam Bond and calandered smooth in incompletely cookedWheel Wright sheet form, carefully straw pulp sometimesdried to avoid warping made as a combinationtendencies board with liners ofsuperior material. The intermediary product of the plaintiff will not fit in with any of the abovesaid description of the mill board since the board which is an intermediary product of the plaintiff is not hard and it cannot be used for binding and allied purposes and also it cannot be marketed as mill board.

3. The intermediary product of the plaintiff upto the stage of the straw board is about 0.42 paise per kilogram and the sale price of the mill board is Re. 0.50 per 8 ounce which is less than one fourth of kilogram and the cost of mill board works out to more than Rs. 2 per kilogram. The mill board usable for binding purposes costs four times as much as the intermediary product of the plaintiff which is soft and not rough.

For the abovesaid reasons the plaintiff contended that the excise duty cannot be levied on the intermediary product as mill board. As extract from the various dictionaries and authorities defined 'mill board' is also enclosed to Ex. P. 7. The first defendant seems to have given a personal hearing to the plaintiff's advocate and after considering the objections put forward in Ex. P. 7 sent a notice to the plaintiff as per his ref. No. V(17)3/1/72 dated 21-9-1974, which is marked as Ex. P. 8. In the notice Ex. p. 8, the first defendant after considering the various points put forward by the plaintiff's advocate during the personal hearing to show that the intermediary product cannot be termed as a 'mill board' coming under item 17(2), directed the plaintiff to state why the intermediary product should not be classified as paper board falling under sub-item (4) of item No. 17 to the First Schedule to the Central Excises and Salt Act, 1944, and further action taken to levy excise duty. The plaintiff was also given opportunity to represent the case in person before the first defendant. Ex. P. 9 is the objection statement made by the plaintiff to the first defendant in respect of the above said notice of the first defendant marked as Ex. P. 8. In Ex. P. 9, the plaintiff submitted the following for the consideration of the first defendant.

1. All along the first defendant was trying to classify the unimpregnated mat as a mill board and now the first defendant is trying to classify the product as 'paper board' falling under sub-item (4) of item No. 17, and this classification is also not correct.

2. The intermediary product is not known in the market either as paper or paper board and the same can have no value and use unless it is stiffened by impregnation with asphalt. Only after that process, it can be used as roofing material. Such a product can never be sold or purchased in the market as paper or paper board.

3. There is a specific technical and commercial meaning for the words 'paper board' as mentioned in the several dictionaries and the intermediary product cannot be termed as paper or paper board.

4. The definition of paper board occurring in item 17(4) of the Central Excises and Salt Act, First Schedule, relates only to product which are commercially understood either as paper or card board of paste board or mill board. In other words, the paper board referred to in item No. 17(4) means some article which has the qualities and is commercially usable for the same purposes as paper i.e. for writing, printing, book binding etc. The essential use of the paper board in the commercial world is for binding purposes on account of its stiffness. As stated earlier the intermediary product cannot be used for binding purposes or for any other purpose which a paper board can be put to.

5. When the intermediary product cannot be classified as a mill board and the same is a cheaper variety of boards known to the paper trade, it is surprising that the first defendant now should fail back on the costlier variety, viz. 'paper board' and seek to levy excise duty on the plaintiff. After considering the objections taken by the plaintiff the first defendant passed an order as per C. No. V(17)/3/1/72 dated 18-8-1975 holding that the intermediary product manufactured out of waste paper before corrugation and impregnation with asphalt solution is an article falling under sub-item (4) of item No. 17, to the First Schedule of the Central Excises and Salt Act, 1944. Ex. P. 10 is the order of the first defendant in which the first defendant after having dealt with the objections taken by the plaintiff came to the conclusion that the light roofing material is liable to excise duty under item 17(4) to the First Schedule of the Central Excises and Salt Act, 1944.

27. Ex. P. 11 is the communication of the second defendant dated 26-8-1975, directing the plaintiff to file the statement of accounts of production and clearance of paper boards in the factory from the commencement of the factory, for taking further action in the matter.

28. By means of notice Ex. P. 12, bearing Ref. No. C.C. 626/75 dated 26-8-1975, the second defendant informed the plaintiff that asphaltic sheets (light roofings) will continue to pay 1 per cent Central Excise duty under Tariff item No. 68 independent of the assessment on paper board.

29. Against the order of the Assistant Collector of Central Excise, Vellore, marked as Ex. P. 10, the plaintiff filed an appeal to the Appellate Collector of Central Excise, Madras in appeal No. 1670/75. The order of the Appellate Collector, Central Excise, dated 9-9-1975, is marked as Ex. P. 13. The operative portion of the order of the Appellate Collector is as follows :-

'The appellants contend that the fibrous mat or board is not at all goods and has got no market by itself. It appears that this issue of the process of manufacture and marketing of finished goods had not been gone into in detail by the original authority. I hereby direct that the Assistant Collector will re-examine the issue afresh and decide the case after giving proper opportunity to the appellants to explain their view point.'

30. Ex. P. 14 is the letter of the second defendant to the plaintiff stating that the intermediary product, viz. paper board manufactured in the factory of the plaintiff is allowed to be cleared without payment of duty on provisional basis pending decision on the appeal by the plaintiff. However, the plaintiff was informed that the finished product, viz. light roofing sheets is to be cleared from the factory only on payment of Central Excise duty leviable under Tariff Item No. 17(4) of the Central Excise Tariff.

31. While the appeal before the Appellate Collector, Central Excise, was pending, the plaintiff also filed a writ petition No. 6287 of 1975 against the orders of the Assistant Collector, Central Excise, Vellore Division in C. No. V/17/2/1/75 T. 2 dated 22-9-1975, marked as Ex. P. 14 that the light roofing sheets is to be cleared from the factory only on payment of Central. Excise duty livable under Tariff Item No. 17(4) of the Central Excise Tariff Ex. P. 15 is the affidavit, supplemental affidavit and memo of writ petition in W.P. No. 6287 of 1975.

32. As against the order of the Appellate Collector, Central Excise, dated 18-8-1975 in C. No. V(17) 3-1-72 directing the Assistant Collector to re-examine the issue afresh and decide the case after giving appropriate opportunity to the plaintiff to explain their view point, the plaintiff filed an other writ petition No. 6858 of 1975 on the file of this court. Ex. P. 17 is the affidavit and the memo of writ petition in W.P. 6858 of 1975. Ex. P. 18 is the show cause notice issued by the Assistant Collector of Central Excise, Vellore Division in C. No. V/17/30/6/76 T. 2 dated 5-8-1977. In the show cause notice Ex. P 18 it is stated that in the Fourth Central Excise Tariff Conference held at Bombay on the 19th and 20th May, 1975, a decision was taken on the advice of the Chief Chemist that the finished product would be classifiable under Tariff Item No. 17(4) of the Central Excise Tariff as they are specially treated as paper board. The board had also examined the classification of the base mat (semi dry) manufactured from waste papier, prior to its impregnation with bitumen to obtain roofing sheets. In the Fifth Central Excise Tariff Conference held at Calcutta on the 12th and 13th August, 1976, it was concluded that since no mechanical pulp is added to the pulp used in the manufacture of the base mats (semi dry) manufactured from pulp or waste paper prior to its impregnation with bitumen, the base mat would not be classifiable as mill board under Tariff item No. 17(4) of the Central Excise tariff. Further the Committee was of the view after due deliberation and advice of the D.G.T.D. representatives that such mats were merely intermediary products and were not known or recognised as Boards or marketed as such and therefore would not be classifiable under T.I. No. 17 of the Central Excise Tariff and the question of levy of duty on intermediary product does not arise. In the show cause notice Ex. P. 18, it is also stated that the present position of light roofing is that they stand exempted under notification No. 2/76 dated 9-2-1976, read with the notification No. 72/76, dated 16-3-1976. The Assistant Collector from the abovesaid notification had taken note of the fact that the Government of India have classified the light roofing under Tariff Item No. 17(4) as could be seen from exemption Notification No. 25/76, dated 9-2-1976 and consequent on the amendment to the Finance Bill and the change of tariff description of the paper it was classifiable under Tariff Item No. 17(2) and this also stand exempted vide Notification No. 72/76, dated 16-3-1976.

Asphaltic roofing sheets manufactured by M/s. Light Roofing Ltd. are exempted and this exemption under rule 8 of the Central Excise Rules, 1944 is effective from 9-2-1976 that is from the date issue of Notification No. 25/76, dated 9-2-1976 The plaintiff was therefore required to show cause as to why the duty should not be demanded on the light roofing sheets cleared from the factory prior to 9-2-1976, that is from the date of issue of Notification No. 25/76 dated 9-2-1976. This was followed by the revised show cause notice dated 30-1-1978 in C. No. V/17/30/6/76 T. 2 by the first defendant which is marked as Ex. P. 1. In Ex. P. 1 the first defendant states as follows :-

'The matter of the classification of asphalt dipped light roofing sheets was considered in the Fourth Central Excise Tariff Conference held at Bombay on the 19th and 20th May, 1975. The Conference decided on the basis of the advice of the Chief Chemist that the aforesaid produce would be classifiable under T.I. No. 17(4) of the Central Excise Tariff as they are specially treated as paper board (vide Tariff advice No. 27/75 F. No. 61/12/72 Cx dated 19-7-1975).'

The notice also stated that.

'In the Fifth Central Excise Tariff Conference held at Calcutta on the 12th and 13th August, 1976 it has concluded that since no mechanical pulp is added to the pulp used in the manufacture of the base mats (semi dry) manufactured from waste paper prior to its impregnation with bitumen, the base mat would not be classifiable as mill board under T.I. No. 17(4) of the Central Excise Tariff.'

Hence the plaintiff was asked to show cause as to why the dutiability of the light roofing sheets cleared from the factory prior to 9-2-1976 i.e., the date of issue by Notification No. 25/76, dated 9-21976 should not be decided. The plaintiff challenges the validity of the show cause notice Ex. P. 1 in the suit as well as in the writ petition. After the issue of show cause notice Ex. P. 1, the writ petition No. 6287 of 1975 was dismissed as infructuous on a memo filed by the advocate for the defendants herein viz the Assistant Collector of Central Excise, Vellore and others. The memo is to the following effect :-

'A revised show cause notice dated 13-2-1978 has been issued to the party. The party is free to urge such points as they may deem fit in the case. The writ petition which relates to earlier orders and earlier order and earlier show cause notice has become infructuous and therefore has to be dismissed and may be dismissed.'

The abovesaid memo is marked as Ex. P. 2. Similarly, the writ petition No. 6858 of 1975 was also dismissed as infructuous on a memo filed by the advocate for the defendant herein and the same is marked as Ex. P. 3. The memo Ex. P. 3 is to the following effect :-

'The Appellate Collector has remanded the case back to the Assistant Collector for fresh consideration. In the light of the decision taken that the intermediary product 'fibre mat' is not liable to duty under Tariff Item 17, the above writ petition has become infructuous and has to be dismissed.'

Hence, on the strength of the abovesaid two memos, viz. Ex. P. 2 and P. 3, both the writ petitions were dismissed. Now we will have to consider whether the plaintiff is entitled to a declaration that the show cause notice dated 30-1-1978 marked as Ex. P. 1 is illegal and void for a consequential permanent injunction restraining the defendants from levying excise duty on the finished product of light roofing produced by the plaintiff.

33. Issue No. 1 : Whether the plaintiff is entitled to the declaration that asphalted roofing sheets were not covered by Tariff Item No. 17(4)

Section 3 of the Central Excises and Salt Act, 1944, provides for the levy of duty and collection of the same. S. 3 reads as follows :-

'3. (1) There shall be levied and collected in such manner as may be prescribed duties of excise or all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule.

(1-A) The provisions of sub-section (1) shall apply in respect of all excisable goods other than salt which are produced or manufactured in India, by, or on behalf of Government, as they apply in respect of goods which are not produced or manufactured by Government.

(2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force.

(3) Different tariff values may be fixed, -

(a) for different classes or description of the same excisable goods; or

(b) for excisable goods of the same class or description :-

(i) produced or manufactured by different classes of producers or manufacturers; or

(ii) sold to different classes of buyers : Provided that in fixing different tariff values in respect of excisable goods falling under sub-clause (i) or sub-clause (ii), regard shall be had to the sale prices charged by the different classes of producers or manufacturers, or as the case may be, the normal practice of the wholesale trade in such goods.'

In the First Schedule to the Central Excises and Salt Act, 1944, the tariff items are detailed. Item 17 of First Schedule relates to paper allied products. Prior to 1976 Item 17 was as follows :-

'Paper : all sorts (including paste board, mill board, straw board and cardboard) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power :- 1. Cigarette tissue Three rupees perkilogram2. Blotting, toilet, target, tissue other One rupee and twentythan cigarettes tissue, teleprinter, paise per kilogramtypewriting manifold, bank, bond, artpaper, chrome paper, tubsized paper,cheque paper, stamp paper, cartridgepaper, waxed paper, polyethylene coatedpaper, parchment, and coated board(including art board, chrome board andboard of playing cards).3. Printing and writing paper, packing Ninety paise perand wrapping paper, straw board and pulp kilogramboard, including grey board, corrugatedboard, duplex and triplex boards, othersorts.4. All other kinds of paper and paper One rupee and twentyboard not otherwise specified. paise per kilogram.

Item No. 17 was amended by Act 66 of 1976 as follows :-

'Paper and Paper Board, all sorts (including paste board, mill board straw board, card board, and corrugated board) in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power - (1) Uncoated and coated printing and Twenty five per centwriting paper (other than poster paper) ad valorem(2) Paper board and all other kinds of Forty per centpaper (including paper or paper boards ad valoremwhich have been subjected to varioustreatments such as coating, impregnating,corrugation, creping and design printing),not elsewhere specified.'

The article in question, viz., light roofing is made from street pickings of waste paper, which is subjected to a process and finally immersed into asphalt or bitumen, which is a petroleum product. The process of manufacture is set out in the Commissioner's report the details of which are extracted above. The material is only paper with about 50 per cent of bitumen. An attempt was made by the Central Excise authorities to bring the intermediary product before immersion into bitumen as mill board and accordingly a show cause notice was issued as per Ex. P. 4, asking the plaintiff to show cause as to why the intermediary product should not be assessed to excise duty under Tariff Item No. 7(3). This court as per the order in W.P. 1873 of 1970 set aside the show cause notice and directed the Assistant Collector, Central Excise to consider the matter afresh after giving an opportunity to the plaintiff to produce the requisite material to sustain their case that the board brought into existence in the course of producing the ultimate product is not a mill board. A second show cause notice Ex. P. 6 dated 7-9-1972 was issued to the plaintiff asking the plaintiff to show cause why the article produced by them should not be treated as excisable under Tariff Item No. 17 of the Central Excises and Salt Act, 1944. To this show cause notice the plaintiff sent its objection as per Ex. P. 7 and contended that the intermediary product cannot be called as mill board. The contentions raised by the plaintiff are also extracted above. After giving a personal hearing the Central Excise authorities issued another show cause notice Ex. P. 8, dated 21-9-1974, by which they sought to classify the intermediary product manufactured by the plaintiff as paper board falling under Tariff item No. 17(4). To this notice also the plaintiff sent its objection as per Ex. P. 9 and the contents of this objection is also extracted above. As per Ex. P. 10, the second defendant decided that the intermediary product manufactured out of waste paper before corrugation and impregnation with asphalt solution by the plaintiffs in its factory at Chettipunniam village, Chingleput Dt. is falling under sub-item (4) of item No. 17 of the First Schedule to the Central Excises and Salt Act, 1944. As against this decision of the Assistant Collector of Central Excise, Vellore, an appeal was filed before the Appellate Collector of Central Excise and the said Appellate Collector of Central Excise was pleased to set aside the order of the Assistant Collector of Central Excise and directed the Assistant Collector of Central Excise to re-examine the issue afresh and decide the case after giving proper opportunity to the plaintiff to explain their view points. As against this order of the Appellate Collector the plaintiff filed a writ petition No. 6858 of 1975 in which the plaintiff prayed for quashing the order of the Appellate Collector, Central Excise. The above said proceedings were taken in respect of the intermediary product.

34. As far as the final product is concerned, viz. the light roofing sheets, the second defendant issued an order as per Ex. P. 14, dated 22-9-1975 that the finished product is to be cleared from the factory only on payment of Central Excise duty leviable under Tariff item No. 17(4) of the Central Excise Tariff. As against this order, the plaintiff filed a writ petition No. 6287 of 1975 for a writ of certiorarified mandamus declaring the above order as void and for quashing the same.

35. Thus from the abovesaid proceedings it is seen that the Central Excise authorities were not in a position to make up their kind whether to tax the intermediary product under Tariff item No. 17(2) or the final product of light roofing material under Tariff Item No. 17(4). The above said show cause notices only resulted in further proceedings by way of appeal before the Appellate Collector and by way of writ petitions before this Court.

36. In the show cause notice Ex. P. 18, certain proceedings of the Tariff Conference relating to the classification of light roofing is found. It is stated in Ex. P. 18 that in the Fourth Central Excise Tariff Conference held at Bombay on the 19th and 20th May, 1975, it was decided on the basis of the advice memo by the Chief Chemist that asphalt dipped light roofing sheets would be classifiable under Tariff item No. 17(4) of the Central Excises and Salt Act as they are specially treated as paper board. In the same show cause notice it is also mentioned that in the Fifth Central Excise Tariff Conference held at Calcutta on the 12th and 13th August, 1976 it was decided that since no mechanical pulp is added to the pulp used in the manufacture of the base mats (semi dry) manufactured from the pulp or waste paper prior to its impregnation with bitumen, the base mat would not be classifiable as mill board under Tariff Item No. 17(4) of the Central Excise Tariff. Further the Tariff Committee was of the view that such mats were merely intermediary products and were not known or recognised as boards or marketed as such and therefore they would not be classifiable under Tariff Item No. 17 of the Central Excise Tariff and the question of levy of duty on intermediary product does not arise.

37. The view of the Central Excise authorities prior to the Notification No. 25/76, dated 9-2-1976 as amended by Notification No. 72/76, dated 16-3-1976 seems to be that the intermediary product is not liable to duty under Tariff Item No. 17 but the final product viz. the light roofing sheets dipped in asphalt is liable to duty under Tariff item No. 17(4).

38. In February 1976 the Government issued a notification exempting the asphaltic roofing sheets from the levy of Central Excise duty. The notification No. 25/76-C.E., dated 9-2-1976 as amended by notification No. 72/76-C.E., dated 16-3-1976 is as follows -

'In exercise of the powers conferred by S. 37(XVII) of the Central Excises and Salt Act, 1944, the Central Government hereby exempt asphaltic roofing sheets falling under sub-item (2) of item 17 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) from the liability of the duty leviable thereon.'

As per this notification it looks as if the Government had already decided that asphaltic roofing sheets falling under Tariff Item No. 17(2) as it then stood. Whatever may be the position prior to the notification but after the abovesaid notification it is clear that the Government is of the view that Asphaltic roofing sheets fall under Tariff Item No. 17(2). An argument was advanced on behalf of the plaintiff that the decision of the authorities that the Asphaltic roofing sheets falling under Tariff Item No. 17(2) was not taken after due notice to the persons concerned. It is not known whether any decision was arrived at by any duly constituted authority to the effect that the asphaltic roofing material come under Tariff Item No. 17(2) after observing the due formalities. But from the show cause notice, Ex. P. 18, it is seen that the excisability of asphaltic roofing material which was the subject matter of discussion in the Fourth and Fifth Central Excise Conferences, was arrived at and that the final product would be classifiable under Tariff item No. 17(4) and the intermediary product cannot be classified under Item No. 17(4).

39. The authorities under the Central Excises and Salt Act have the power to classify the excisable items and in view of the fact that the matter had been discussed in Central Excise Conference and a decision was arrived at we have to hold, in the absence of material contra, that due procedure had been observed and a decision had been arrived a with reference to the excisability of the ultimate product, viz light roofing material. Since materials are available in the case that after due deliberations in the Central Excise Tariff Conferences, a decision was arrived at that the finished product of light roofing material is assessable to duty under Tariff Item No. 17(4).

40. So far as the plaintiff is concerned, the notice had been issued as per Ex. P. 14, dated 22-9-1975, that light roofing sheets is to be cleared from the factory only on payment of Central Excise duty leviable under Tariff Item No. 17(4). As against this notice the plaintiff had filed a writ petition No. 6287 of 1975 and on the publication of the notification No. 25/76 a memo was filed by the defendant that the earlier show cause notice had become infructuous and the writ petition may be dismissed. Accordingly the writ petition was dismissed. Hence there is no adjudication on the matter as to whether the decision of the Central Excise authorities that the final product is classifiable under item No. 17(4) is correct or not. Now the question to be considered is whether the finished product will fall under tariff item No. 17(4). It is evident that the raw material for the light roofing sheets is waste paper. All kinds of paper and paper boards not specifically provided in tariff item No. 17(1), 17(2), 17(3) fall under tariff item No. 17(4). The fact that the light roofing material is made by immersing the paper mat in bitumen is not disputed. By immersing into bitumen the paper mat do not cease to be a product of paper. Since all sorts of paper fall within item No. 17(1), 17(2) and 17(3), I have to hold that the finished product, viz. light roofing material which is a paper product will fall under tariff item No. 17(4). The very fact that the Government had passed the orders exempting the asphaltic roofing sheets from item No. 17 clearly shows that the Government had also decided that this item falls under tariff item No. 17. Hence my finding on this issue is that the finished product viz. asphaltic roofing sheets is an item taxable under Central Excise Tariff No. 17(4).

41. Issue No. 3 : 'Whether the plaintiff is entitled to the declaration that the show cause notice dated 13-2-1978 is illegal The point for determination in the writ petition :- Whether the petitioner viz. the plaintiff in the suit is entitled to a writ of certiorarified mandamus or any other appropriate writ quashing the proceedings of the second respondent dated 30-1-1978/13-2-1978 in C. No. V/17/30/6/76 T. 2

It is seen that the earlier show cause notice viz. Ex P. 6 dated 7-9-1972 and Ex. P. 8, dated 21-9-1974 were issued only in respect of intermediary product in the process of manufacturing asphaltic roofing sheets viz fibrous mat. The Central Excise authorities were vacillating in classifying the intermediary product and at one time as per Ex. P. 6 they sought to classify the intermediate product as a mill board. The second show cause notice, viz. Ex. P. 8 sought to classify the intermediary product as a paper board falling under sub-item (4) of item 17 to the First Schedule of the Central Excise Tariff. The Central Excise duty was sought to be levied on the finished product of asphaltic light roofing sheets only for the first time as per Ex. P. 12, dated 26-8-1975, by which the second defendant seeks to levy excise duty on the finished product at one per cent under Tariff item No. 68 independent of the assessment of paper board. The order Ex. P. 14, dated 22-9-1975 for the first time mentions that the duty is leviable in respect of the finished product under Tariff Item No. 17(4). This order is not preceded by any show cause notice with regard to the final product and further this order was set aside by the Appellate Collector, Central Excise as per Ex. P. 16 dated 10-10-1975. As against this levy the plaintiff filed W.P. No. 6287 of 1975 which was pending till 20-2-1978 on which date the writ petition was dismissed in pursuance of the memo filed by the defendants in the suit, which is marked as Ex. P. 2. After the dismissal of the writ petition No. 6287 of 1975, on account of the revised show cause notice viz. Ex. P. 1, the proposal regarding the imposition of excise duty as per Ex. P. 14 dated 22-9-1975 was not pursued. Ex. P. 14 was issued only in respect of the finished product viz. light roofing sheets seeking to levy excise duty at one per cent as per old tariff item No. 17(4) Ex. P. 14 is not preceded by any show cause notice and in fact one of the contentions taken by the plaintiff in W.P. No. 6287 of 1975 is that the imposition of duty as per Ex. P. 14, without any show cause notice is illegal and void. Since any levy of excise duty will have to be preceded by a show cause notice giving an opportunity to the persons affected to explain, a show cause notice was issued in respect of the finished product of light roofing material as per Ex. P. 18, dated 5-8-1977. The other two show cause notices, viz. Ex. P. 6, dated 7-9-1972 and Ex. P. 8 dated 21-9-1974 were not pursued since in the meanwhile the department as a result of deliberations in the Central Excise Conference had come to the conclusion that the base mat prior to its impregnation with bitumen will not be classifiable as mill board since no mechanical pulp is added to the pulp used in the manufacture of the base mats which is manufactured from pulp or waste paper. On the basis of the advice of the Chief Chemist of the department the Central Excise authorities seems to have arrived at the conclusion that the fibre mat or the base mat which is an intermediary product will not attract the levy of excise duty in view of the fact no mechanical process involved in the manufacture of the same. This is made clear in the third show cause notice Ex. P. 18 dated 5-8-1977. Hence, the department did not pursue the show cause notice Ex. P. 6 dated 7-9-1972, and Ex. P. 8 dated 21-9-1974, in respect of the intermediary product. It is not brought to the notice of this court whether any opinion was offered by the Chief Chemist or whether any decision was taken in the Central Excise Tariff Conferences held in 1975 and 1976 and whether the end product, viz. the asphaltic roofing material is liable to excise duty under Tariff item No. 17(4). But as per Ex. P. 18, the third show cause notice with reference to the levy of excise duty, an inference is sought to be drawn that the finished product is excisable under Tariff item No. 17(4) on the strength of the notification No. 25/76, dated 9-2-1976, by which the Government exempted the levy of duty in respect of the light roofing material. Apart from notification No. 25/76, dated 9-2-1976 exempting the light roofing material from the levy of excise duty no material is placed before this court to show whether the Central Excise authorities have applied their mind with reference to the classification of the finished product of light roofing material and arrived at a decision after issuing due show cause notice to the persons affected. However, relying upon the exemption notification No. 25/76 an inference is sought to be made that the finished product was excisable under Tariff item No. 17(2) added as per Act 66 of 1976 and on that basis the show cause notice dated 5-8-1977 marked as Ex. P. 18, was issued.

42. The case of the plaintiff is that the show cause notice Ex. P. 18, dated 5-8-1977, seeking the levy duty on the light roofing sheets cleared from the factory prior to 9-2-1976, that is from the date of issue of notification No. 25/76, is barred by time. It is to be noted that the show cause notice does not state the time from which the duty is sought to be levied and in this respect the show cause notice can only be said to be vague in material particulars. In support of the contention that the department cannot levy excise duty for the period prior to 9-2-1976 reliance is placed upon Rule 10 and 10-A of the Central Excise Rules. As per the show cause notice Ex. P. 18 action is sought to be initiated in respect of excise duty that escaped assessment for the period prior to 9-2-1976. The relevant rules 10 and 10-A of the Central Excise Rules will have to be understood for a better understanding in this case. Rule 10 as it then stood reads as follows :-

'10. Recovery of duties or charges short levied or erroneously refunded - (1) When duties or charges have been short levied through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis-statement as to the quantity, description or value of such goods on the part of the owner, or when any such duty or charge, after having been levied, has been owing to any such cause, erroneously refunded, the proper officer may, within three months from the date on which the duty or charge was paid or adjusted in the owner's account current, if any, or from the date of making the refund, serve a notice on the person from whom such deficiency in duty or charges is or are recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.

2. The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty or charges due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow.'

The period of three months prescribed under rule 10(1) is now enhanced to six months. Hence as per the rule 10, the department can claim excise duty on light roofing material only in respect of the roofing sheets produced during six months prior to the show cause notice, Ex. P. 18.

43. In order to meet this argument the defendants contended that the show cause notice was issued under Rule 10-A of the Central Excise Rules in respect of which the period of limitation is five years. Rule 10-A of the Central Excise Rules reads as follows -

'10. A. residuary powers for recovery of sums due to Government. - (1) Where these rules do not make any specific provision for the collection of any duty, or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these rules, the proper officer may serve a notice on the person from whom such duty, deficiency in duty or sum is recoverable requiring him to show cause to the Assistant Collector of Central Excise why he should not pay the amount specified in the notice.

(2) The Assistant Collector of Central Excise, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), shall determine the amount of duty, deficiency in duty or sum due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined within ten days from the date on which he is required to pay such amount or within such extended period as the Assistant Collector of Central Excise may, in any particular case, allow.'

In an answer to the interrogatories served by the defendant on the plaintiff in Appln. No. 207 of 1980 the stand of the defendants is evident. The relevant question and answer is as follows :-

Q. Show cause notice dated 13-2-1978 issued to the petitioner does not mention the authority or rule under which it is issued Please state whether or not it is issued under rule 10 of the Central Excise Rules

A. Notice must be read as deemed to be issued under rule 10-A of the Central Excise Act.'

This rule 10-A of the Central Excise Rules was held to be ultra vires by Division Bench of this court in the case reported in the Citadel Fine Pharmaceuticals Pvt. Ltd., Madras v. The District Revenue Officer, Chingleput and others, : (1973)1MLJ99 , where the court observed as follows :-

'The next line of attack of the petitioner is that the main enactment being silent on the question of levy of duty on escaped turnover, the rules cannot provide for it. In support of that contention the learned counsel relied upon Haji F.A. Kareem Sait v. Dy. Commercial Tax Officer, Mettupalayam, 1966 18 STC 370 to which one of us was a party. There it was held that sub-rule (7) of rule 5 of the Central Sales Tax Act (Madras) Rules, 1957 providing for limitation and determination of escaped turnover by best judgment is in excess of the rule making power and the sub-rule as a whole is therefore invalid. Relying upon the aforesaid decision, it is contended that the Act insofar as it does not provide for recovery of escaped assessment or provide residuary powers for recovery of sums due to Government but only provides for them in the rules, the demand in pursuance of the rules is unsustainable. The contention of the learned counsel is well founded. In R. Sundararajulu Naidu v. Entertainment Tax Officer, Madurai VII, 1967 1 MLJ 458, Venkatadri J. had occasion to consider a similar question in dealing with the validity of the rule as made under the Madras Entertainment Tax Act (X of 1939), where in the main Act there was no provision for assessing the escaped income but a provision has been made only in the rules. The learned Judge held that where the main enactment is silent on the question of levy of escaped assessment, the rules made under the Act cannot extend the charging power. Following the decision in Haji P.A. Kareem v. Dy. Commercial Tax Officer, Mettupalayam, 1966 18 STC 370, referred to above we hold that rule 12 in so far as it seeks to extend the charging power under S. 3 of the Act is invalid and without jurisdiction.'

In the case, reported in M/s. Agarwal Brothers, Madras 1 v. Union of India, 1972 2 MLJ 476 Ramanujam J. following the reasoning in the above cited case held that rule 10-A of the Central Excise Rules could not be invoked. The fact that rules 10 and 10-A of the Central Excise Rules were held to be ultra vires is also referred to with approval in the case reported in Ramaliniga Choodambikai Mills Ltd. v. The Government of India and others, : 1984(15)ELT407(Mad) . On the strength of the above decisions the plaintiffs contend that the levy of excise duty cannot be made under rule 10-A of the Central Excise Rules, which is held to be ultra vires by this court.

44. As against this contention, the case of the defendants is that the Government have the power to make law prospectively as well as retrospectively and a levy can be imposed even with retrospective effect. In support of this contention a case reported in Chhotabhai Jethabhai Patel and Co. v. Union of India and another, 1952 Suppl.S.C.R. 1, was cited. In that case it had been observed that the -

'Parliament acting within its own legislative filed had the powers of a sovereign legislature and could make a law prospectively as well retrospectively and the duties leviable under the Central Excises and Salt Act, 1944, as provided by S. 7(2) of the finance Act, 1952, notwithstanding their imposition with retrospective effect and even it it be that they were incapable of being passed on to a buyer from the tax prayer were duties of excise' within the meaning of Entry 84, List I of the Seventh Schedule to the Constitution of India. The levy of tax retrospectively under S. 7(2) of the Finance Act, 1951 was valid and did not did not contravene Art. 19(1)(f) of the Constitution.'

This decision only reiterates the powers of the sovereign legislature to make laws prospectively as well as retrospectively in respect of the levy of excise duty. In this case no law being made but a rule viz. rule 10-A in respect of escaped assessment was made when there is no such provision in the main Act itself. On that account Rule 10-A was held to be ultra vires. Under the circumstances, the above said Supreme Court decision which reiterates the sovereign powers of the legislature to levy excise duty prospectively and retrospectively, will not in any way support the case of the defendants.

45. Reliance was placed on behalf of the defendants on the case reported in Assistant Collector of Central Excise, Calcutta v. National Tobacco Co. of India Ltd., 1972 S.C. 2563 1978 ELT 416, where the Supreme Court had occasion to deal with Rule 10-A of the Central Excise Rules. In the course of the judgment it is observed as follows :-

'It is true that Rule 10-A seems to deal with collection and not with the ascertainment of any deficiency in duty or its cause by a quasi-judicial procedure. If, however, it is read in conjunction with S. 4 of the Act, we think that a quasi-judicial proceedings, in the circumstances of such a case, could take place under an implied power. It is well established rule of construction that a power to do something essential for the proper and effectual performance of the works which the statute has in contemplation may be implied. See Craies on Statute Law, 5th Edition, page 105.'

This case cannot be an authority for the proposition that Rule 10-A is valid. The question whether Rule 10-A which relates only with collection can be made use of for the ascertainment of deficiency in duty in that case and the court construing the provisions of Rule 10-A held that the power to do something essential for the proper and effective performance of the collection of duty viz. ascertainment of the sum can be done by the Excise authorities. The question whether there can be a valid rule just as the rule 10-A, in the absence of legislative provision in the Act was not considered by the Supreme Court in the above decision. Hence this case will not lend support to the case of the defendants.

Hence Rule 10-A cannot be invoked to levy excise duty in respect of the light roofing material manufactured prior to 9-2-1976, since such a rule had been declared to be ultra vires.

46. Another argument advanced on behalf of the defendants is that the power to decide the question whether an article is excisable under the Central Excises and Salt Act is within the sole purview of the authorities concerned and the civil court had no jurisdiction to question the decision of the authorities. It is contended that the classification of the commodity is a statutory right of the officer concerned and the court cannot classify the article for purpose of levy of duty. The Central Excises and Salt Act had created a hierarchy of officers who were endowed with knowledge of classification of goods occurring in the Schedule. Hence the courts cannot go into the classification regarding the dutiability for the purpose of levy of Central Excise duty.

47. In reply to this contention it was contended on behalf of the plaintiff that in any enactment an express prohibition of jurisdiction cannot be inferred unless it is specifically stated in the enactment itself. In the Central Excises and Salt Act, 1944, there is no express prohibition of the jurisdiction of the civil courts. In the case reported in Ram Swaran and others v. Shikar Chand and another, : [1966]2SCR553 , the bar of jurisdiction of civil courts contained in U.P. (Temporary) Control of Rent and Eviction Act (3 of 1947) came to be decided. The Supreme Court in deciding the question observed as follows -

'We ought to point out that the provisions contained in Ss. 3(4) and 16 undoubtedly raise a bar against pleas which challenge the correctness or propriety of the orders in question. The merits of the order are concluded by the decision of the appropriate authorities under the Act and they cannot be agitated in a civil court. But where a plea seeks to prove that the impugned order is a nullity in the true legal sense, that is a plea which does not come within the mischief of the bar created by Ss. 3(4) and 16 of the Act.'

48. In the case reported in the Pabbojan Tea Co. Ltd. etc. v. Dy. Commissioner, Lakshmipur and others, : (1967)IILLJ872SC , where the Supreme Court had an occasion to deal with similar provisions in the Minimum Wages Act and the observation of the Supreme Court can be usefully extracted here -

'It is pertinent to note that S. 24 of the Act creates an express bar in respect of a particular kind of suits, namely, suits for recovery of wages in certain eventualities. The obvious intention was that a poor employee was not to be driven to file a suit for the payment of the deficit of his wages but that he could avail himself of the machinery provided by the Act to get quick relief. It does not in terms bar the employer from instituting a suit when his claim is that he has been called upon to pay wages and compensation to persons who are not governed by the notification under the Minimum Wages Act. On an analysis of the provisions of the Act we find (1) Suits of the nature to be found in this case are not expressly barred by the Act; (2) There is no provision for appeal or revision from the direction of the authority given under S. 20(3) of the Act; and (3) The authority acting under S. 20(3) might levy a penalty which might be as high as ten times the alleged deficit of payment which again is not subject to any further scrutiny by any higher authority. In view of our findings as above, as also the fact that the authority in this case disregarded the provision as to hearing and inquiry contained in the Act for all practical purposes, we hold that the civil court had jurisdiction to entertain the suits.'

49. In the case reported in Dhulabhai etc. v. State of Madhya Pradesh and another, : [1968]3SCR662 , the Supreme Court observed as follows -

'Where the statutes gives a finality to the orders of the special tribunals the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.

Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.

Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the enquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provide for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.

Challenge to the provisions of the particular Act as ultra vires cannot be brought before tribunals constituted under the Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals.

When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.'

In the case reported in the State of West Bengal v. The Indian Iron and Steel Co. Ltd., : [1971]1SCR275 also the above principle was recognised.

50. Taking into consideration the principles laid down in the above decisions and also bearing in mind the fact that the complaint by the plaintiff relates to the very validity of the proposed assessment and also taking into consideration that there is no express bar of the jurisdiction of the civil court in the Central Excises and Salt Act, 1944, we will have to come to the conclusion that the objection of the defendants with regard to the jurisdiction of the court to entertain the suit will have to be negatived.

51. The next question raised by the defendants is that as per Ex. P. 1, only a show cause notice had been issued and the plaintiff is at liberty to file his objections and that the second defendant after considering the objections will decide the leviability of excise duty on the finished product manufactured prior to 9-2-1976, and there are hierarchy of authorities to whom the plaintiff can approach for redress against any decision that may be remanded and hence the writ at the stage of show cause notice will not lie. In reply to this contention, the case of the plaintiff is that the show cause notice without jurisdiction or on a claim barred by limitation can be quashed by a writ of certiorari and the writ of mandamus can also be issued in respect of the same. In support of this contention the plaintiff placed reliance on the following decisions.

52. In the case reported in Union of India v. G. Vittappa Kamath : (1956)2MLJ455 , a Division Bench of this court came to the conclusion that S. 40 of the Central Excises and Salt Act, does not oust the jurisdiction of ordinary civil courts when a party is aggrieved by the administration of the Act, and a suit alleging that excise tax was levied illegally against the assessee is maintainable. S. 40(2) certainly contemplates the filing of suits against the Government and suits can be instituted within the period of six months specified in the sub-section.

52A. This jurisdiction of civil courts to interfere with the orders of the taxing authorities is not confined merely to cases of excess or lack of jurisdiction of these authorities, but also extends to the correction of errors apparent on the face of the records. Sub-section (2) of S. 40 does not deal with the same subject matter as Sub-section (1) which is very wide in its language and import. That sub-section is intended to protect officers personally from actions but sub-section (2) certainly contemplates other cases where relief is sought against the Government as such. A right of suit at Common Law is implicit in sub-section (2). It is unnecessary to restrict the effect of prohibition of filing of suits in respect of any act done within six months to personal remedies alone. Civil Courts have therefore jurisdiction to entertain suits with regard to illegal recovery of Central Excise duty.

53. In the decision reported in Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I and another, : [1961]41ITR191(SC) , the Supreme Court held in a case where the Income-tax Officer who had no jurisdiction to issue a notice in respect of non-disclosure when there was no non-disclosure of a primary material fact which the assessee was bound to disclose under S. 34(1)(a) of the Act, the High Court can interfere by issuing an appropriate writ. The headnote in the above decision may be usefully extracted here -

'The High Courts have ample powers under Art. 226 of the Constitution, and are in duty bound thereunder to issue such appropriate orders of directions as are necessary in order to prevent persons from being subjected to lengthy proceedings and unnecessary harassments by an executive authority acting without jurisdiction. Alternative remedies such as are provided by the Income-tax Act cannot always be a sufficient reason for refusing quick relief in a fit and proper case.'

54. In the case reported in Rajaram Varma v. State of U.P. and others, : AIR1968All369 , a Full Bench of the Allahabad High Court observed as follows :-

'It is true that if a statute creates a new right or a new obligation and also specifies the particular mode in which the same is to be enforced, the jurisdiction of ordinary courts is by implication excluded and the enforcement of the right or the obligation has to be done only by recourse to the procedure laid down by that statute. But where a statute is not of that kind and a right of obligation does not owe its existence to the statute, and all that the statute does is that it provides a special procedural machinery for its enforcement, there is no justification for inferring a necessarily implied exclusion of the ordinary, usual, and well recognised remedies.'

55. In the case reported in Union of India v. A.V. Narasimhalu : 1983(13)ELT1534(SC) , in which the Supreme Court observed as follows :-

'But the exclusion of the jurisdiction of the civil court to entertain a suit does not exclude the jurisdiction of the High Court to issue high prerogative writs against illegal exercise of authority by administrative or quasi-juridical tribunals. The finality which may be declared by the statute qua certain liability either by express exclusion of the jurisdiction of the Civil Court or by clear implication does not affect the jurisdiction of the High Court to issue high prerogative writs.'

56. In the case reported in Jiyajeerao Cotton Mills Ltd. v. The Income-tax Officer, C. Ward, Companies Dist. I, Calcutta and others, 1976 T. L.R. 1087, a Division Bench of the Calcutta High Court held as follows :-

'Where the question, whether any particular proceeding has become barred by lapse of time, depends upon investigation of certain facts or determination of certain facts, then it is proper that such a question should be agitated before the forum created under the particular statute. But where the action of an officer is barred on admitted facts or on the fact of it, then as the jurisdiction of the officer to act depends on initiation of the proceeding within the time, in such a case resort to Art 226 for obtaining relief is not inappropriate provided the other conditions for seeking relief under Art. 226 are fulfilled.'

57. In the case reported in the Provincial Govt. of Madras v. J. S. Basappa : [1964]5SCR517 , the Supreme Court observed as follows :-

'The finality that statute conferred upon orders of assessment, subject, however, to appeal and revision, was a finality for the purposes of the Act. It did not make valid an action which was not warranted by the Act, as for example, the levy of tax on a commodity which was not taxed at all or was exempt. In the present case the taxing of sales which did not take place within the State was a matter wholly outside the jurisdiction of the taxing authorities and in respect of such illegal action the jurisdiction of the civil court continued to subsist in our judgment the suits were competent.'

58. In the case reported in Sakthi Sugars Ltd. and others v. Dy. Commercial Tax Officer, Bhavani and others, 23 S.T.C. 232, a Division Bench of the court observed as follows :-

'But if a factual determination on a question tantamounts to the investigation of a jurisdictional fact, them the High Court will not refrain from investigating the same and adjudicating upon it if the result of such an investigation decides a jurisdiction fact which would enable the taxing authorities to assume jurisdiction and bring to tax certain articles, then it cannot be said that no rule at all under Art. 226 can be issued.'

Relying on the principles laid down in the above decisions and in view of the findings that the show cause notice is potently barred by limitation this court has got the power to issue a writ of certiorarified mandamus to quash the illegal notice.

59. On behalf of the defendants reliance is sought to be placed on the decision of the Privy Council reported in the Secretary of State for India, rep. by the Collector of South Arcot v. Mask and Co., ILR 1940 Mad. 599, where their Lordships of the Privy Council held that the jurisdiction of civil court is excluded in respect of an assessment made by the Assistant Collector on the duty leviable on imported goods under the Sea Customs Act since the right of revision is conferred as per the provisions of the Act. But the Privy Council in the course of judgment observed that -

'The determination of this question must rest on the terms of the particular statute which is under consideration, and decisions on other statutory provisions are not of material assistance, except in so far as general principles of construction are laid down.'

In the course of the same judgment the Privy Council also observed as follows :-

'It is settled law that the exclusion of jurisdiction of the civil courts is not to be readily inferred, that such exclusion must either be explicitly, expressly or clearly implied. It is also well settled that even if jurisdiction is so excluded, the civil court has jurisdiction to examine into cases where the provisions of the act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of natural justice. Many of the cases referred to in the judgment below are of this nature, and are not relevant to the present case, in which there are no allegations of such nature.'

It is obvious that the above Privy Council case does not relate to a case where the provisions of the Act had not been complied with and as such does not apply to the facts of the present case.

60. In view of the memos Exs. P. 2 and P. 3 and the consequent dismissal of the writ petition Nos. 6287 and 6858 of 1975 since the subsequent show cause notice Ex. P. 1 was issued, it cannot be said that the proceedings under Ex. P. 1 is in continuation of the earlier show cause notice viz. Ex. P. 6, P. 8 and P. 18. Hence the argument of the defendants that Ex. P. 1 must be deemed to be the continuation of the earlier proceedings cannot be entertained for the following reasons -

1. The earlier show cause notices are in respect of the intermediary product, viz. the fibre mat or the paper mat;

2. There was only one order imposing duty in respect of the final product as per Ex. P. 14 and there has been no show cause notice in respect of levying excise duty on final product;

3. The earlier show cause notice are not in any way connected with the show cause notice Ex. P. 1 in view of the fact that memos filed in both the writ petitions viz. Ex. P. 2 and P. 3 which clearly state that the earlier show cause notices have become infructuous.

On account of these reasons it cannot be said that Ex. P. 1 is the continuation of the earlier show cause notices.

61. Taking all the above said circumstances there is no difficulty in coming to the conclusion that the show cause notice Ex. P. 1 is illegal, void and obviously barred by time and this court has the jurisdiction to grant appropriate reliefs. Hence my finding on this issue is that the plaintiff is entitled to the declaration that the show cause notice dated 13-2-1978 is illegal. I answer the point in the writ petition in affirmative and hold that the plaintiff is entitled to the relief prayed for in the writ petition.

62. Issue No. 4 : Whether the claim by the defendant is in time

Rules 10, 10-A and 11 of the Central Excises and Salt Act, 1944, were deleted and a new rule 10 was made by the Notification No. 267/77-CE, dated 6-8-1977, providing for six months for any duty not levied ordinarily and five years for any duty not levied on account of fraud or mis-statement, suppression etc. Ex. P. 1, the show cause notice does not allege any fraud, suppression or mis-statement etc. to invoke five years period of limitation. It is not also the case of the defendants that in the previous proceedings there was any fraud or suppression or mis-statement. The question that was previously agitating the minds of the Central Excise authorities was whether the intermediary product is excisable or not. The Central Excise authorities had been visiting the factory seeing the process of manufacture and were trying to determine the excisability of the goods manufactured. Hence there cannot by any fraud or suppression or mis-statement and the five years period of limitation does not apply. Even if Ex. P. 1 which was issued on 13-2-1978 is considered as the continuation of the earlier show cause notice viz. Ex. P. 18 which was issued on 5-8-1977, yet the claim for duty is barred applying the new Rule 10(1). Hence my finding on this issue is that the claim is barred by limitation.

63. Issue No. 5 : To what relief the plaintiff is entitled

In the result there will be a decree in favour of the plaintiff :-

(a) declaring that the show cause notice dated 13-2-1978 marked as Ex. P. 1 is illegal, void and barred by limitation;

(b) granting permanent injunction restraining the first defendant from proceeding with the enquiry or taking any steps or passing any orders in pursuance of the above said show cause notice.

64. Consequent on the above findings the writ petition No. 774 of 1980 is allowed. In view of the fact the plaintiff is succeeding on point of law there will be no order as to costs.


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