JAYSYNTH DYECHEM PVT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioners are a private limited company incorporated under the provision of the companies Act, 1956, and inter alia, manufacture synthetic organic dyestuff. In the manufacture of the dyestuff, the petitioners are required to use intermediates as raw materials and these intermediates are liable to payment of excise duty and countervailing duty under Tariff Item No. 68 to the First Schedule to the Central Excises and Salt Act (hereinafter referred to as the 'act' ). The manufacture of synthetic organic dyestuff is liable to payment of excise duty under Tariff item No. 14d of the First Schedule. By Notification No. 103/61, the Central Government exempted the dyes derived from coal tar and manufactured wholly or partly out of the intermediates, falling under Item No. 14d of the First Schedule from so much of the duty of excise leviable thereon as is equivalent to the amount of the countervailing customs duty paid on such imported intermediates. The petitioners were thus entitled to avail of the exemption granted by notification dated April 20, 1961. The Central Government in exercise of powers conferred by sub-rule (2) of Rule 8 of the central Excise Rules, 1944 (hereinafter referred to as the 'rules') by notification dated June 19, 1980 directed that Notification No. 103/61 shall stand amended in the manner specified in column 3 of the Table annexed to the notification. Notification No. 103/61 was amended by insertion of the following proviso :

(2.) THE petitioner Company sought exemption by following the procedure laid under Rule 56a for the period between March 7, 1981 and November 28, 1981 and exemption was granted by the Assistant Collector of Central Excise, Bombay though it was made clear that the exemption granted was on provisional basis. On December 7, 1981, the Assistant Collector served notice upon the Company intimating that there was no legal basis for granting permission applied seeking exemption under Rule 56a. The Assistant Collector stated that under Rule 56a, the company is not entitled to exemption and consequently the exemption availed of stands cancelled, and the Company should pay the duty within 10 days from the service of the notice. The Company then filed reply and also written submission and thereafter, the Assistant Collector passed adjudication order on February 26, 1982 holding that the decision communicated to the company on December 7, 1961 is correct and the Company should honour the demand made by payment of amount of Rs. 3,62,253. 75. The order passed by the Assistant Collector is under challenge in this petition filed under Article 226 of the Constitution of India.

(3.) SHRI Poddar, learned counsel appearing on behalf of the petitioners, submitted that the assistant Collector was in error in holding that not only the procedure prescribed under Rule 56a but the substantial provisions of Rule 56a are applicable while ascertaining whether the company is entitled to avail of the exemption granted under Notification No. 103/61 dated April 20, 1961. The Assistant Collector relied upon the amended Rule 56a which came into force on march 3, 1979 to hold that the Company is not entitled to avail of the exemption under notification dated April 20, 1961. Shri Desai, learned counsel appearing on behalf of the department, submitted that the Assistant Collector was justified in relying upon the amended provisions of Rule 56a and was not bound to restrict the application of Rule 56a only to the procedural aspect. In view of the rival submission, the short question which falls for determination is whether the Assistant Collector was right in extending the application of Rule 56a from procedural rules to the substantive provisions. Rule 56a deals with special procedure for movement of duty paid materials or components parts used in the manufacture of finished excisable goods. Sub-rule (2) provides that the Collector may, on application made and subject to the conditions mentioned in sub-rule (3) and such other conditions as may from time to time be prescribed by the Central Government, permit a manufacture of any excisable goods to receive materials or components parts of finished product on which the duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 known as countervailing duty has been paid in his factory for the manufacture of these goods or for the more convenient distribution of finished product and allow a credit of the duty already paid on such materials or components parts or finished products. The Central government, in exercise of powers conferred by Section 37 of the Act amended the Central excise Rules, 1944 on March 3, 1979 and the relevant amendment to Rule 56a reads as under :