RAMCHAND SHARMA Vs. COLLECTOR CUSTOMS AND CENTRAL EXCISE

JUDGEMENT

(1.) THIS is a petition filed by two petitioners jointly. Petitioner No. 1 carries on the business of stitching HDPE woven sacks and petitioner No. 2 carries on the business of printing HOPE woven sacks. According to the petitioners, on receiving orders from their customers they receive HDPE fabrics from the Manufacturers/dealers directed by the customers. The petitioners only do the job work of stitching and printing the sacks. In case the customers desire delivery outside Indore, then as per their instructions the sacks are despatched through the transport as directed by them. The Central Government in exercise of its powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules 1944, has exempted woven sacks of polymers of ethylene or propylene or its combination thereof, falling under heading No. 46. 01 or 63. 01 of the Schedule from the whole of the duty of Excise specified in that Schedule vide notification No. 223/86-CE, dated 3. 4. 1986. The aforesaid notification was again amended by notification No. 453/86-CE dated 20. 11. 1986. In the earlier notification dated 3. 4. 1986, the Government has exempted woven sacks of polymers of ethylene or propylene or a combination thereof from the whole of the duty of Excise leviable thereon but by the latter notification dated 20. 11. 1986 the exemption was made applicable if only such woven sacks of polymers of ethylene or propylene or as the case may be, a combination thereof, are manufactured on flat knitting looms. Thereafter, the Central Government again issued a notification No. 3/87, C. E. dated 7. 1. 1987 further amending notifications dated 3. 4. 1986 and 20. 11. 1986, wherein it was provided that woven sacks of polymers of ethylene or propylene or a combination thereof were exempted falling under heading No. 46. 01 or 63. 01 of the Schedule to the Central Excise Tariff Act, 1985 from the whole of the duty of Excise leviable thereon, which is specified in the said Schedule, but the exemption was applicable only if the aforesaid sacks were not manufactured on circular looms. As such, the HDPE woven sacks manufactured on circular looms are not exempt from the Excise duty but the other HDPE woven sacks which are not manufactured on the circular looms arc subject to the excise duty (sic ).

(2.) THE case of the petitioners is that petitioner No. 1 works only on stitching machine and does the job work of stitching HDPE woven sacks on the orders of the customers. He is not manufacturing the aforesaid sacks on circular looms and he is also not in possession of any circular looms. Similarly petitioner No. 2 is only doing the job of printing the HDPE woven sacks. A raid was conducted by the Central Excise authority on the premises of the petitioners and a seizure memo was prepared of the seizure of HDPE woven sacks from both the petitioners. Thereupon the petitioner No. 1 sent a letter dated 2. 8. 1988 to the Collector, Central Excise, Indore, stating that he is not in possession of any circular looms. Therefore, HDPE woven sacks seized by respondent Nos. 3 and 4 are not liable to Excise duty vide the aforementioned notifications of the Central Government. He, therefore, demanded immediate release of the goods. He again sent a letter reiterating the earlier demands but even after the expiry of six months, the seized goods have not been released. The petitioners have averred that the seizure of the goods is completely illegal, arbitrary and without jurisdiction. The petitioners, therefore, had filed Writ petition No. 1204 of 1988 before this Court. The aforesaid petition was dismissed by this Court vide order dated 1. 12. 1989 holding it as premature.

(3.) THE respondent No. 5 after completion of the investigation issued a show cause notice to both the petitioners along with four others on January 18, 1989. In the aforesaid show cause notice the petitioners were asked to show cause as to why the seized HDPE sacks should not be confiscated under the rules and why penalty should not be imposed upon them under the Rules. According to the petitioners, the notice is without jurisdiction because the HDPE sacks recovered from the possession of the petitioners were not prepared by the petitioners on circular looms, as has been admitted by the respondents themselves. The respondents were in error in holding that as the HDPE sacks are manufactured out of the cut pieces of HDPE fabrics woven on circular looms supplied by M/s. Raj Packwell and therefore they are HDPE sacks woven on circular looms. As such, the benefit of exemption under the notification dated 3. 4. 1986 by the Government of India as amended is not available to the petitioners. Actually the respondents are wrongly interpreting the notification because the notification nowhere says that the HDPE woven sacks manufactured from the fabrics woven on circular looms are not exempted from the duty. Actually only those HDPE sacks which are manufactured on circular looms are not exempt from duty. All other HDPE sacks manufactured by any other process are exempt from the excise duty. The petitioners undisputedly do not manufacture the HDPE sacks on circular looms but are only stitching the HDPE sacks by machines from the fabric woven on circular looms. Hence the authorities had no right to add any word to the taxing notification in accordance with the well settled principles of interpretation of a taxing statute. The petitioners have, therefore, prayed that the show cause notice dated 18. 1. 1989 (Annexure-F) issued by the respondent No. 5 be quashed and the respondents be commanded to release the goods seized by the respondent Nos. 3 and 4 by seizure memo dated 30. 7. 1988 and the respondents be further directed not to interfere with the business of the petitioners as the petitioners are not in possession of circular looms and, therefore, they are entitled to the benefit of exemption granted by the notification dated 30. 4. 1986 as amended.