MEHENDRA MILLS LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this group of Special Civil Applications certain common questions under the Central Excises and Salt Act, 1944 (hereinafter called as the Act) are raised and hence they were heard together and are being disposed of by this common judgment. All the petitioners are running composite textile mills in this city. They have got both the spinning and weaving departments in their mills. In their spinning department, they manufacture yarn. This yarn is taken out from the spindles and shifted to the weaving department where it is utilised for manufacturing fabrics. The respondent authorities exercising power under the Act and the rules framed thereunder insisted that during the relevant time while preparing the price lists of manufactured fabrics the concerned petitioners mills companies should have included the excise duty payable by them on yarn which was earlier manufactured by them in the spinning department and which was captively consumed by them for manufacturing the end product viz. fabric, in the assessable value of the manufactured final product i.e. the fabric. As they had not done so, they were liable to pay difference in duty which would have been paid on the final product if the excise duty on manufactured yarn was included, and the duty which they actually paid on the fabric, by not including this excise duty. Accordingly show cause notices were issued to the concerned mill companies under the then prevailing Rules 10 and 10A of the rules and in most of the cases the dispute was adjudicated upon. In some cases, the petitioners carried the matters in appeal, but the appeals failed. Under these circumstances, some of the petitioners have challenged the final adjudication order and appellate orders while some of them have challenged such show cause notices under Rules 10 and 10A before adjudication and have straight come to this court at notice stage itself. The issuance of these notices was challenged on diverse grounds which will be indicated hereinafter. Before we do so, it will be necessary and appropriate to have a quick glance at the relevant statutory provisions, holding the field at the relevant time in the light of which these proceedings will have to be decided. Statutory Backgrounds : -

(2.) EXCISE duty is payable on manufactured articles at the rates indicated against the concerned article in the schedule to the Act. The relevant sections of the Act read as under : -

(3.) SECTION 12 also empowers the Central Government by notification to declare that any of the provisions of the Customs Act, 1962 relating to the levy of and exemption from customs duties, drawback of duty, warehousing, offence and penalties, confiscation and procedure relating to offences and appeals shall, with such modifications and alterations as it may consider necessary or desirable to adapt them to the circumstances be applicable in regard to like matters in respect of the duties imposed by Section 3. Section 37 deals with the general rule making power of the Central Government and authorities the Central Government to make rules and carry into effect the purpose of the Act. Sub -section (2) of Section 37 gives a list of items on which in particular, and without prejudice to the generality of the fore -going power, such rules can be framed by the Central Government. The Central Excise Rules, 1944 have been framed by the then Central Government in exercise of the said powers and these rules have continued in operation with modifications from time to time.