J D PATEL Vs. UNION OF INDIA

JUDGEMENT

(1.) Petitioner No. 1 is a partner of petitioner No.2 firm carrying on business of manufacturing Resins and inter-lining material used by tailors and garment makers for collars of shirts and bush-shirts at Udhna in Surat district. The factory of the petitioner-firm wont into production in the month of April 1970 The Excise Authorities in the initial stages classified the product of the petitioner firm to be liable to excise duty under sub-item (iii) of item No.19 in the Schedule to the Central Excise and Salt Act 1944 which subjected cotton fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials to the duty for the time being leviable on the base fabrics if not already paid. It is the case of the petitioners that the Excise Authorities at Kanpur charged similar product manufactured by M/s. Indian Coating and Laminating Corporation having its factory at Kanpur as cotton fabrics not otherwise classified under Item No. 19(II) (f) of the said Schedule which subjects the item to excise duty to be paid according to the quality of cloth and the same varies from 3.6 paise to 15.5 paise per meter. The grievance of the petitioners is that the action of the Excise Authorities in Gujarat in subjecting their products to duty under sub-item (III) of Item No. 19 would result in the petitioners paying duty at the rate of 25 per cent ad-valorem. The petitioners therefore made a representation to the second respondent who is the Superintendent of Central Excise Surat by their letter of March 9 1972 that the product of the petitioner-firm should be charged under Item No. 19(1)(2) (f) and not under item No.19(III). The petitioners also pointed out by their another letter of March 13 1971 the financial impact on account of the action of the Excise Authorities in classifying the petitioners product as covered Item No.19 (III) instead of Item No.19(1)(2)(f) of the said Schedule. The 2nd respondent by his letter of June 9 1971 intimated the petitioners that the Deputy Chief Chemist was of the opinion that the fabric which is produced by the petitioner-firm would fall under the term coated fabrics and therefore the classification made by the authorities was a valid classification. The petitioners being aggrieved with this decision of the 2nd respondent carried the matter in appeal before the Collector of Central Excise Baroda respondent No.3 herein. The appeal was filed before the 3rd respondent on 14th June 1971. The petitioners also submitted their observations and explanation regarding the opinion of the Deputy Chief Chemist by a separate letter of July 9 1971 addressed to the 3rd respondent. The petitioner also requested the 3rd respondent to decide the appeal as early as possible as the petitioner-firm was put to a great financial loss in the market on account of the impugned classification. The petitioner firm particularly pointed out to the Excise Authorities that there was only one other factory manufacturing the product of the kind and in view of the high duty charged by the Excise Authorities at Surat the petitioner-firms product would be out of market as they would not be able to stand in the competition with the product of Kanpur factory. It appears that the 3 respondent asked the petitioners to appear in person for hearing of the appeal on October 28 1971 The petitioners were heard on October 28; 1971 by the 3rd respondent. It is the grievance of the petitioners that they did not hear anything from the 3rd respondent after the hearing was over for a long time. The petitioners therefore by their telegram of February 26 1972 urged respondent No.3 to give his decision in appeal as early as possible as the petitioner-firms business had come to a standstill. It is the grievance of the petitioners that respondent No.3 instead of pronouncing his order in appeal preferred by the petitioners intimated the petitioners by his letter of March 7 1972 that the appellate powers of the Collector were transferred to the Appellate Collector Central Excise Bombay and as such the appeal of the petitioners was transferred to the said office. As the petitioners did not get any intimation from the Appellate Collector Bombay about the date of hearing of the appeal they have moved this Court by way of this petition filed on April 20 1972 for appropriate writs orders and directions quashing and setting aside the order passed by the 2nd respondent holding that the petitioner-firm should be charged under Item No.19(III) and restraining the respondents from recovering duty under the said item.

(2.) This petition has been resisted by the Union of India-respondent No.1 herein contending inter alia in the affidavit-in-reply filed on its behalf by one Mr. P.J. Pohowalla who happens to be assistant Collector of Central Excise Surat that according to the opinion of the Chief Chemist the product of the petitioner-firm is in the form of a white cotton fabric on one side of which is an uneven coating of polythene plastic material the percentage of which is 37.1 (approximately and the rest being cotton fabric and the sample there of did not pass the laboratory test for water proof-ness and it was therefore validly classified as a product subject to the duty under Item No.19(III) of the aforesaid Schedule. It was admitted in the said affidavit-in-reply that the petitioners had preferred an appeal before the 3rd respondent but since it stood transferred to the Appellate Collector Bombay it was necessary for the petitioners to have approached the said authority for his decision instead of preferring this petition. The Union of India has denied that the petitioners product is known in the market as fabrics coated with artificial plastic material.

(3.) Petitioner No. I has filed an affidavit-in-rejoinder and contended that since the process of their manufacture which leaves the major part of cotton fabric uncovered by plastic material it could not be said to be a coating. It was further pointed out in the affidavit-in-rejoinder by the petitioners that Allahabad High Court in Miscellaneous writ Petition No.4999 of 1973 filed by M/s Indian Coating and Laminating Corporation (the only other manufacturer in India of the similar product) has by its order of 7th November 1973 upheld a similar contention that the product in question was liable to duty under Item No. 19 (1)(2)(f) and not under Item No. 19(III) of the Schedule.