KAMALA MILLS LTD , BOMBAY Vs. UNION OF INDIA

JUDGEMENT

(1.) This is an appeal preferred by the original petitioners against the judgment dated October 31, 1985 delivered by Justice Mrs. Manohar dismissing the petition filed under Article 226 of the Constitution of India for quashing the show cause notices issued by the Superintendent, Central Excise and the orders passed thereon by the Assistant Collector and in appeal by the Collector. The facts giving rise to filing of the petition are as follows.

(2.) The petitioners are a composite textile mill and manufacture cotton yarn and cotton fabrics out of cotton yarn manufactured. The petitioners are liable to pay excise duty under the provisions of the Central Excises and Salt Act, 1944, both in respect of the manufacture of cotton yarn as well as cotton fabrics. Rule 96V of Central Excise Rules, 1944 prescribes for a special procedure where a manufacturer, who manufactures cotton yarn falling under Item No. 18E of the First Schedule to the Central Excise Act, uses the whole or part of the yarn manufactured in the manufacture of cotton fabrics in his own factory. The rule requires the manufacturer to make an application to the Collector and thereafter the special procedure under Rule 96W applies. Under Rule 96W, the Central Government has been empowered to issue notification fixing a rate per square meter of the cotton fabrics having regard to the average production of cotton fabrics from one kilogram of cotton yarn. A manufacturer whose application had been granted under Rule 96V can pay a sum calculated according to such rate and such payment shall be the full discharge of the liability for the duty leviable on the yarn and used in the manufacture of fabrics. Rule 96W(3) prescribes that the sum payable in respect of the cotton yarn shall be paid by the manufacturer along with the duty on fabrics in the manner prescribed in Rule 52. The Central Government issued notifications from time to time fixing the rate of duty payable on yarn under the provisions of Rule 96W.

(3.) The petitioners had applied under Rule 96V and were accorded facility of the special procedure. The petitioners paid duty in accordance with the procedure from March 1, 1974. The petitioners received three show cause notices in respect of the period commencing from March 1, 1974 till May 24, 1977. By these show cause notices the Superintendent of Central Excise called upon the petitioners to pay excise duty on cotton fabrics which was short levied on account of non - calculation of excise duty on yarn in the value of the cotton fabrics. The petitioners sent the reply, but the Assistant Collector of Central Excise confirmed the demands by order dated 12, 1981. The petitioners preferred appeals, but the Collector of Central Excise confirmed appeals and upheld the order passed by the Assistant Collector. The petitioners thereupon moved this Court in write jurisdiction and the learned Single Judge by the impugned order dismissed the petition upholding the orders of the excise authorities, and that has given rise to filing of the present appeal.