MADURA COATS LIMITED Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) In the instant writ petition the petitioner prays for issue of a writ in the nature of certiorari requiring respondents Nos. 1, 2 and 3 to transmit and certify the records of the proceedings before them to this Court in the matter of determining as to whether nylon and rayon wrap sheets produced by the petitioner company are excisable items and their orders made in such proceedings including the orders dated 24th March, 1975 and 6th February, 1976 so that they are quashed or set aside. The petitioner company also prayed for a writ in the nature of prohibition prohibiting respondents from treating nylon or rayon warp sheets produced by the petitioner company as excisable items and also prohibiting the respondents from demanding, levying or collecting any excise duty in respect of such nylon or rayon warp sheets. The petitioner also prayed for a writ in the nature of mandamus prohibiting the respondents from treating nylon or rayon warpsheets arranged or assembled by the petitioner company as excisable items and/or demanding, levying or collecting any excise duty in respect of such nylon or rayon warp sheets.

(2.) The petitioner's case, in short, is that the petitioner is required by some of its customers to arrange nylon or rayon yarn supplied by such customers in parallel rows loosely held together by cotton yarn supplied by the petitioner company. Such arrangement of rayon or nylon is called a Tyre cord warp sheets. The petitioner states that to make a warp sheet, the petitioner first winds the nylon or rayon yarn supplied by its customers into bobbins. The yarn is then twisted in a twisting machine and thereafter used as a warp on a loom, cotton yarn being used at widely spaced intervals as a weft to hold the nylon or rayon yarn in position. According to the petitioner, a given length of warp sheets consists of 99.4% nylon and 0 6% cotton and excepting the process as stated hereinbefore, no manufacturing process is involved in making warp sheets and no new commodity known to commerce or industry comes into being when yarn is arranged or assembled to form a warp sheet. The petitioner also contends that under the definition given by the Indian Standards Institution, yarn is a generic term for an assemblage of fibre or filament, either natural or artificial twisted or laid together, to form a continuous strand suitable for use in weaving, knitting or otherwise inter-twisting to form textile fabrics. In the writ petition a sample length of such warp sheet was also annexed being Ext. "A". The petitioner contended that the nylon and rayon yarn are liable to a duty of Central Excise under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) and such yarn falls under Item 18 of the First Schedule of the Act. The cotton yarn is also liable to such duty and falls under Item I8A of the said First Schedule. According to the petitioner, the warp sheets being yarn and not any other commodity are not excisable once more. The petitioner also contended that as. a matter of fact, the excise authorities also proceeded on such basis in connection with the warp sheets produced by the Madura Mills Company Limited at Madurai and the said view of the excise authorities will appear from a letter dated ! 5th of March, .1957 from the Inspector of Central Excise to Madura Mills Company Limited, a copy whereof is also annexed to the writ petition being marked as annexure T.

(3.) The petitioner company also contended in the writ application that Madura Mills Company Limited also made cotton warp sheets, which is cotton yarn instead of nylon or rayon yarn arranged or assembled in the same way, and such warp sheets were held to ba yarn by the High Court at Madras in the case of Madura Mills Company Limited v. Government of Madras, reported in 25 Sales Tax Cases, page 407. The petitioner contended that despite the aforesaid position, the Excise Authorities in West Bengal wrongly proceeded on the footing with effect from March. 1975 that a nylon" or rayon warpsheet was a separate item of manufacture and is liable to Central Excised under Item No. 68 of the First Schedule. The petitioner made a representation on or about 18 of April, 1975 to the Secretary, Central Board of Excise and Customs New Delhi, but no action was taken on such representation. Much controversy was raised by the respective parties in the Rule as to whether such representation constituted an appeal or not and I shall refer to such contention later on. As the Central Excise Authorities had been demanding payment of excise duty in respect of nylon and rayon warp sheets which fell within Item 68 of the First Schedule and as such, was liable to 1% ad valorem excise duty, the petitioner had to pay under protest unjust demand of excise duty for the period between 24th March, 1975 and 7th May, 1957. The petitioner also contended that on or about 30th April, 1975, the respondent No. 4 issued a notification exempting goods falling under Item 68 of the First Schedule manufactured in a factory as a job work from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work. The said circular was annexed to the writ application being annexure 'III'. The petitioner stated that from 7th of May, 1975 up to the time of moving the instant writ application before this court, the petitioner company under protest had been paying the duty at the said rate of 1% of the conversion charges, that is, the amount it charges to its customers for arranging the nylon or rayon yarn in the manner stated hereinbefore. It appears from the writ petition that the respondents contended in or about November, 1975 that the petitioner was not entitled to pay duty on the aforesaid warp sheets on the basis that what was done by the petitioner company amounted to job work But according to the respondents, in as much as 0.6% of the warp sheets consisted of cotton yarn, which was supplied by the petitioner, the said warp sheet could not be held as job work because all the raw materials or components of the finished product were not supplied by the customers of the petitioner and therefore, the petitioner was not entitled to the exemption on the basis of the said circular dat3d 30th April, 1975. It further appears that by the letter dated 6th of February, 1976 the respondent No. 2 rejected the contention of the petitioner that the petitioner was entitled to contend that warp sheet was not excisable and/or to pay duty on the basis of the job work. The petitioner's claim of refund of a sum of Rs. 95,648.16 was also rejected by the respondent No. 2.