KUIL FIREWORKS INDUSTRIES Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) This appeal is directed against the judgment of the Customs, Excise and Gold Control Appellate Tribunal (hereinafter referred to as the Tribunal) dated July 2, 1976 in Appeal No. E/SB/1395/91/MAS. The appellant, Kuil Fireworks Industries, manufactures fireworks which fall under Heading 3604.10 of the Central Excise Tariff. By notification No. 167/86, dated March 1, 1986 exemption from excise duty was granted in respect of various goods including goods falling under Heading 3604.10 provided that no process in or in relation to the manufacture of the said goods is ordinarily carried on with the aid of power. The appellant claimed exemption in respect of fireworks manufactured by it on the basis of the said notification on the ground that no process in relation to the manufacture of the said goods was ordinarily carried on with the aid of power. On September 2, 1987 the excise authorities detained 6,222 wooden cases of fireworks valued at Rs. 39,83,698.50 and a sum of Rs. 5,97,555/- was demanded as excise duty payable on the said goods on the ground that the goods were not entitled to exemption from excise duty under the said notification. The appellant filed a writ petition in the Madras High Court against the said order for detention of the goods. In the said writ petition the High Court passed an interim order on September 29, 1987 staying the operation of the order of detention of the goods dated September 2, 1987 and permitting the appellant to clear the goods for sale without payment of excise duty. In the meanwhile, notification No. 167/86, dated March 1, 1986 was amended by notification No. 222/87, dated September 17, 1987 whereby exemption in respect of fireworks falling under Chapter 36.04 was withdrawn. Since the goods had been permitted to be cleared on the basis of the interim order dated September 29, 1987 passed by the Madras High Court, the Superintendent of Central Excise issued a show cause notice dated February 16, 1988 under Section 11-A of the Central Excise Act demanding duty of Rs. 5,97,555/- being the duty on the goods detained on September 2, 1987 valued at Rs. 39,83,698.50 on the ground that the said goods were cleared after September 1, 1987 when the exemption form duty was not available. The appellant submitted their reply to the said show cause notice wherein it was submitted that the goods were detained by detention order dated September 2, 1987 by the department and could be cleared only in pursuance of the interim order dated September 29, 1987 passed by the High Court and that no duty was payable in respect of the said goods. The Assistant Collector of Central Excise by order dated December 18, 1990 confirmed the demand of duty of Rs. 5,97,555/- made in the show cause dated February 16, 1987 in view of the decision of this Court in Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, Bombay, Division II, (1989) 4 SCC 592, wherein it was decided that the rate of duty prevalent on the date of removal is only applicable. It was held that since the goods were removed after September 17, 1987 excise duty was payable on the same. The Assistant Collector did not go into the merits of the claim of the appellant that they were not using power for manufacture of fireworks. The said order of the Assistant Collector of Central Excise was affirmed in appeal by the Collector (Appeals) in his order dated August 1, 1991. Before the Tribunal reliance was placed by the appellant on the decision of the Calcutta High Court in Collector of Customs v. Priyanka Overseas (P) Ltd., 1989 (41) ELT 195 (Cal), and it was urged that as the goods were detained illegally by the customs authorities, the appellant could not be penalised for the illegal act of the authorities and that since the goods were manufactured prior to September 17, 1987 and in the normal course the goods would have been put in the market stream much before the withdrawal of the exemption notification, the duty applicable will be at the rate when the goods were detained and not from the date of clearance of the goods. The Tribunal, however, rejected the appeal and held that the decision of the Calcutta High Court Priyanka Overseas (P.) Ltd. (supra) could not be invoked in view of the decision of this Court in Wallace Flour Mills Company (supra) and Collector of Central Excise, Hyderabad v. Vazir Sultan Tobacco Co. Ltd., Hyderabad, (1996) 3 SCC 434 , wherein it has been laid down that the rate of duty applicable will be the one applicable on the date of clearance of the goods. Before the Tribunal the appellant also sought to place reliance on the exemption granted under notification No. 175/86, dated March 1, 1986 on the ground that the appellant is a small scale industry. The said contention was, however, not entertained by the Tribunal on the view that it was not raised before the lower authority and it could not be urged at the appellate stage.

(2.) Shri S. Muralidhar, the learned counsel appearing for the appellant, has urged that the decision of the Calcutta High Court in Priyanka Overseas (P.) Ltd., (supra) has been upheld by this Court in Priyanka Overseas Pvt. Ltd. v. Union of India, (1991) Suppl. SCC 102 . The appellant in that case had, on December 17, 1987, filed the bills of entry for home consumption as required under Section 68 of the Customs Act with a prayer for debonding the goods of 3935.364 MT which were stored in a private warehouse. The customs authorities, on that very day, i.e., December 17, 1987, cancelled the license for warehousing the quantity of goods in respect of which the bills of entry were filed by cancelling the bond and deleting the said godown from the relevant licence issued for the quantity of 11,500 MT. The keys of the godown were also handed over to the appellant simultaneously, as a result of which though the goods remained in the said godown but not as a warehouse and the appellant was allowed to remove the goods without payment of any duty. It was not disputed that the remaining goods were also stored in a private warehouse and the appellant had filed bills of entry and complied with all the required formalities for debonding and clearance of the goods on January 28, 1988 and that the appellant was entitled to an order cancelling the licence of the private warehouse enabling it to remove the goods. On these facts this Court observed:

(3.) The submission of Shri Murlidhar is that the principle laid down in the aforesaid decision of this Court in Priyanka Overseas Pvt. Ltd. v. Union of India, (supra) is applicable in the facts of this case because the goods had been wrongly and illegally detained by the customs authorities on September 2, 1987 and by the time the goods were released for clearance on the basis of the interim order passed by the High Court on September 29, 1987, the exemption from duty under notification No. 167/86 had been withdrawn by notification No. 222/87, dated December 17, 1987. He has urged that the appellant cannot be made to suffer on account of illegal act of the excise authorities and that the principle laid down in Wallace Flour Mills Company (supra) and Vazir Sultan Tobacco Co. Ltd. (supra) will have no application in the facts of this case.