UNION OF INDIA Vs. SHEEL THERMOPLASTICS LTD

JUDGEMENT

(1.) THIS is an appeal preferred by Union of India against judgment dated April 15, 1988 delivered by learned single Judge in Writ Petition No. 1795 of 1986. By the impugned judgment the learned Judge set aside the order dated March 20, 1986 passed by the Assistant Collector of Central Excise and also the notice issued on July 14, 1986 in pursuance of that order. The learned Judge held that the Item manufactured by the respondent Company was liable to be classified under Tariff Item No. 68 of the Central Excise Act and the Company was entitled to the exemption from payment of excise duty in accordance with exemption Notification No. 182/82. The learned Judge further directed the appellants to finalise the refund claim filed by the Company within period of eight weeks and then refund the amount along with interest at the rate of 12% per annum. The facts giving rise to passing of the impugned order are as follows.

(2.) RESPONDENT No. 1 Company was incorporated as a Private Limited Company and in the factory situated at Tarapur manufactures P.V.C. Leather cloth. In May, 1981 the Company had acquired Central Excise Licence under Central Excises and Salt Act, 1944. The product manufactured is a plastic article and the process undertaken is by applying several layers of P.V.C. paste on thin cotton fabric. The cotton fabric is first treated with non -thermo -plastic compound which fills intrinsic holes and makes it suitable for carrying the P.V.C. The several layers of P.V.C. are then applied and the end product P.V.C. compound is 6 to 10 times in weight as compared to the base cotton fabric. The percentage of cotton fabric in the final product is only 8% to 15%, and the end product has special properties and the characteristics of foamed plastic. The Excise Department provisionally classified the product on August 5, 1981 under Tariff Item 19(iii) of the First Schedule to the Central Excises and Salt Act. The Company was thereafter clearing the goods manufactured by paying the excise duty under the said Tariff Item. It is the claim of the Company that duty was paid under Tariff Item 19(iii) under mistake of law and the mistake was realised is August 1985 on delivery of a judgment by the Supreme Court reported in : 1985(21)ELT633(SC) , Union of India & Ors. v. Ahmedabad . The Company claimed that the duty was payable only under the residuary Tariff Item No. 68 and the excess duty was paid under mistake of law. The company thereupon filed re -classification claim on October 21, 1985 and on November 26, 1985 sought refund of duty paid from September 1981 onwards. The Company further claimed that on May 11, 1982 the Central Government published exemption Notification No. 182/82 in respect of the items liable to duty under Tariff Item No. 68 and therefore from that date onwards the Company was not liable to pay any amount of duty.

(3.) THE learned single Judge accepted the claim of the Company that the item manufactured is liable to payment of excise duty under Tariff Item No. 68 and the claim of the Department that duty is payable under Tariff Item 19(iii) was turned down. The learned Judge held that as the duty is payable under Tariff Item No. 68, the Company is entitled to the advantage of exemption Notification dated May 11, 1982 and from that date onwards the Company was not liable to pay any duty. The Department was directed to finalise the refund claim within period of eight weeks from the receipt of the statement by the Company setting out the particulars of the refund amount claimed. The decision of the learned single Judge is under challenge.