MAHENDRA 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 any 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 bury 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.) First Schedule to the Act at Serial No. 18 provides for excise duty payable on man-made fabrics other than mineral fibres man-made filament yarns cellulosic spun yarn and non-cellulosic wastes all sorts. Item 18A of the Schedule provides for ad valorem duty on cotton yarn all sorts. It therefore becomes clear that the yarn manufactured by the concerned petitioners in their spinning departments is dutiable and they are bound to pay excise duty as per the aforesaid items in the Schedule. As per Item 19 and 22 of the First Schedule the final product is also liable to excise duty. Item 19 provides for the levy of ad valorem excise duty on cotton fabrics mentioned therein. Item 22 deals with ad valorem duty on man-made fabrics. It therefore becomes clear that both the yarn manufactured by the petitioners in their spinning department and the fabric which they ultimately manufacture in the weaving department by captively consuming the yarn are liable to excise duties. It also becomes obvious that the moment yarn is manufactured on the spindles it is liable to excise duty. As per Items 18 and 18A these petitioners Mill companies had to pay separate excise duty on yarn and if the yarn was captively consumed they had ultimately to pay the requisite excise duty on the final product viz. fabric also.