Shelat, C.J. -
(1.) Prior to march 1, 1961, only cotton fabrics were under entry 19 in the First Schedule to the Central Excises and Salt Act, 1944, chargeable to excise duties therein set out. By Finance Bill of 1961, item 18A was inserted in that Schedule and accordingly cotton yarn amongst other Articles became chargeable to excise duty at the rate of 30 naye Paies per kilogram in respect of yarn of less than 35 counts. By a trade notice bearing No. 16 of 1961 dated March 6, 1961, the Central Excise authorities notified that the aforesaid duty at the prescribed rates would be leviable on cotton yarn, twist, thread, ect., with reference effect from the midnight of February 28 and March 1, 1961, the trade c also made to clear that the duty on yarn would be in addition to the duty cotton fabrics and that yarn used in the weaving section of a factory by itself shall be assessed to duty before its issue to the weaving section. It appears that owing to certain difficulties felt by the authorities as also the trade in the matter of the proper assessment and levy of the said duty on yarn, Section EVI containing Rules 96V, 96W and 96X was inserted in the Central Excise Rules, 1944, called the Central Excise (sixth Amendent) Rules, 1961, under which a new procedure called the producer as to compounded levy was evolved. The effect of who produced was that a manufacturer that a manufacturer or part thereof in the manufacture of cotton fabrics in his own factory would have the option to pay compounded duty as might be prescribed by the Central Government from time to time, not at the time when the yarn was issued to the wearing section but at there time when cotton fabrics made from such yarn were cleared, on ascertain basis namely, on per square meter of cotton fabrics c from such yarn. These rules were published by a notification bearing No. 110 of 1961 dated April 20, 1961.
(2.) Under clause (1) of Rule 96 V such a manufacturer has to make an application for permission to apply the new procedure and on such application being grand, he would have the right to pay the compounded levy during the period so permitted insead of the standard rate of duty prescribed by the new entry 18A. Calues (2) of Rule 96V, however provided that such an application should be made so as to cover a period of at least six consecutive calendar months though the claues gave discretion to the Collector to given such permission felt that he did not wish to avail himself of the produce of compounded levy, he could recede the standard duty payable under entry 18A but such a manufacturer would have to give one week's notice in writing to the proper officer of his intention not to avail to the new procedure and if he were to fail to give himself such a notice, he would procedure for a period of six months from the date so such 1961. By a further notification dated April 20, bearing No. III of 1961, the central Government in pursuance of rule 96W direct that the rate of duty in respect of cotton yarn of any count shall be 1.2 naye paise pre square yarn metre of cotton fabrics produced from such yarn. The result of rule 96V and the said notification was that a manufacturer working a composite factory would be entitle to pay duty at the rate of 1.2 naye paise pre square metre of cotton fabrics produced by him at the time of clearance of those fabrics rather than pay the standard duty on yarn issue by him for there manufacturing process as prescribe by entry 18A of the first schedule. It appears, however, that certain difficulties in applying Rule 96V and in making assessment of compound duty arose and to obviate those Baroda, issued trade notices from time to time in pursuance of the power reserved under Rules of the collector to issue written instructions providing for supple mental maters arising out of the rules. By a trade notice No. 92 of 1961 dated April 27, 1961, after setting out the procedure a to the application provided that cotton fabrics produced from non- duty paid yarn under the new system previously produced from yarn on which duty was paid at the standard rate and separate accounts in from RGI and EB 4 should be mainted in respect of such fabrics. The trade the seciple procedure could be availed of if so desired by a manufacture with effect from April 1, 1961, such a manufacture would have segregation of the two kinds of stocks of cotton fabrics and maintaince of as provided by clause 8 thereof. A provision for retrospective opting to the new procedure as necessary by reason of the fact that thorough compounded duty became leviable as from April 1, 1961, the notification publishing the published on April 1, 1961, and the trade notice informing the trade of the special procedure was issued for the first time on April 20, 1961, and the trade notice informing the trade of the special procedure was issued first time on April 27, 1961,. As further difficulties were reported to the excise authorities in the matter of segregating the two stocks and of maintenance of the two separate accounts, an interim scheme and procedure were evolved by the authroises as set out in the trade notice No. 109 of 1961 issued on May 19, 1961. In this trade notice, after drawing the attention of the trade to the earlier trade notice 4 No. 92 of 1961 it as stated that by the artier trade notice N. 92 of 1961 it was already decided that the scheme of compounded levy if so desired by any factory; would- be applied to it with effect from April 1, 1961 although an application under R. 96V (1) was made and permission obtained thereon after April, 1, 1961. The trade notice further stetted tithe was rerouted to the authorities that there was generally a time-lag of about five to six weeks between the completion of the manufacturer of cotton fabricsand their packing in bals and that on account f this time-lag cotton mills were experiencing difficulties in separating and distinguishing cotton fabrics manufactured from yarn liable to duty from cotton fabrics manufactured from yarn cleared before March 1, 1961 and therefore not liable to duty or from yarn on which duty was already paid at the time of clearance during the month of March 1961. In order to eliminate this difficulty the trade notice provided that duty at the compounded rate of 1.2 naye Paise per square metre should be charged on al fabrics which wee baled on or after April 1, 1961, or before it and that no yarn duty should be charged on fabrics packed before April 1, 1961, irrespective of whether they were made from yarn issued on and from April 1, 1961, or before it and that noyarn duty should bechargedon fabrics packed before April 1, 1961. Having provided for such a uniform system of charging compounded duty the trade notice further provided that it had also ben decided that duty paid on yarn during the month of March 1961 and till such date in April when the compounded levy payable by a such a mill from April 1, 1961. This was explained by the trade notice stating that "from such mill as opt for the compounded levy from 1st April 1961 there would beno conception of duty on yarn cleared during the month of March 1961 for manufacture of fabrics with the factory itself and duty will be realised on al fabrics baled on or after 1st April 1961 at the time of their clearance." Since an argument was addressed to us on the language of clause 5 of this trade notice, it is necessary to quote clause 5 in its entirely. That clause provides- "The above procedure is an intemrim arrangement for three months only. Continuance of this scheme beyond 30-6-1961 should not be necessary and the duty thereafter shall be collected on the normal basis of actual clearance without reference to the date of packing." It appears that it was subsequently feat that though cotton fabrics contemplated by this trade notice might have been manufactured and baled before April 1, 1961, there was a possibility of their not being cleared by June 30, 1961. N order to obviate this difficulty a trade notice No. 127 of 1961 dated July 1, 1961, was issued whereby after referring to the aforesaid trade notice No. 109 of 1961 it was stated that "The procedure for clearance of cotton fabrics packed before 1-4-1961 conveyed therein has been extended up to 30-9-1961. After the expiry of this period the duty shall be collected on the normal basis of actual clearance without reference to the date of packing." By further trade notices bearing Nos. 166 of 1961 and 173 of 1961, respectively dated October 7 and November 2, 1961, the period for clearance of cotton fabrics packed before April 1, 1961, was extended first up to October 31, 1961 and thereafter up to December 31, 1961. Finally, trade notice No. 157 of 1961 dated September 12, 1961, was issued by the Central Excise Collector, Baroda, by which he provided that composite mills switching over to the compounded levy scheme after June 30, 1961, were not entitled to opt for the new procedure retrospectively from April 1, 1961, an further mow, that they would not be entitled to avail of "the procedure outlined in Collectorate trade Notice No. 109/1961 for adjustment of duty on yarn." This trade notice also provided that that the composite mills which opt after June 30, 1961, should follow the procedure laid down in para 8; of the aforesaid Trade Notice No. 92 of 1961 and that Para 9 of the said trade notice No. 92 of 1961 would not be applicable to the mills switch govern to the compounded levy scheme after June 30, 1961.
(3.) On April 6, 1961 the petitioner mills applied to the Superintendent, Central Excise, Ahmedabad, for the prescribed form stating that the mills intended to adopt the new procedure and that therefore in the meantime the mills should be permitted to discontinue to pay the standard rate of duty on yarn produced by it with immediate effect and to refund to them he duty so far levied and collected from them. On May 8, 1961 the excise authorities replied that cotton fabrics produced from non-duty paid yarn under the compounded levy system should be kept completely segregated from the previsouly produced cotton fabrics from yarn on which duty had ben paid at the standard rate and that separate accounts in the aforesaid two prescribed forms should be maintained in respect of the said fabrics. These instructions wherein accordance with Clause 8 of the trade notice No. 92 of 1961 dated April 27, 1961. Along with this letter the excise authorities enclosed the prescribed form for enabling the petitioner mills to make the application as provided under Rule 96-V. On may 11, 1961 the petitioner mills sent the prescribed from duly filled in asking for permission to adopt the compounded levy system for the period from April 1, 1961 to September 30, 1961. On May 24, 1961, the Inspector, Central Excise, Ahmedabad intimated to the petitioner mills that the competent authority had granted permission to them to avail of the compounded levy system in respect of cotton yarn duty for the period commencing from April 1, 1961 to September 30, 1961. On May 29, 1961 the petitioner mills asked for certain clarification with regard to goods exported by them and on May 31, 1961 the Superintendent, Central Excise advised the mills to pay up the compounded duty on yarn in question till the matter was clarified by the Collector in whom the matter had ben referred. Since the petitioner mills did not exercise the option granted to them, the Inspector, Central Excise by his letter dated June 13, 1961 requested the petitioner mills to give reasons for not having so far exercised the option of the compounded levy scheme. On June 14, 1961 the petitioner mill replied that since the compounded levy system was for a temporary period of three months only, they were not inclined to operate the optional for the month of June 1961 and that they would inform the authorities the next month if the aforesaid system was extended. On July 27, 1961 the petitioner mils wrote to the Inspector, Central Excise that they would be enforcing the option to pay the compounded duty permitted to them on and from August 1, 1961. On august 14, 1961 the petitioner mils applied to the Inspector, Central Excise claiming a sum of R. 39,545-12 an Paise, excluding the compounded duty for the month of July 1961. Presumably this differences was claimed by the petitioner mills on the footing that though they had exercised the option only firm August 1, 1961 the said option would be retrospectively effective as from April 1, 1961 and therefore the petitioner mills would be bound to pay only duty at the compounded, rate and not the standard duty prescribed under Entry 18-A. In the meantime, as aforesaid, the Collector, Central Excise issued his trade notice dated September 12, 1961 which inter aia provided that composite mills switching over the compounded levy scheme after June 30, 1961 were not entitled to exercise retrospectively their option as from April 1, 1961 and consequntly were also not entitled to the benefit of refund and adjustment provided by the trade notice No. 109 of 1961 dated May 19, 1961. By his order dated October 12, 1961 the Assistant Collector rejected the aforesaid claim on the ground that the petitioner mills had switched over to the compounded levy system after June 30, 1961 and as clarified byte trade notice No. 157 of 1961 dated September 15, 1961 they were not entitled to claim either refund or adjustment of the aforesaid sum of Rs. 39,545-12 nP. Aggrieved by this order the petitioner mills filed an appeal before the Collector, Central Excise, raising a number of contentions. These contentions were, however, rejected by the Collector and by his order dated February 19, 1962 the Collector held that the petitioner mils were not entitled to the said refund or adjustment, first by reason of the fact that they had exercised the option on and from August 1, 1961, i.e., after June 30, 1961, and secondly because in terms of Para 8 of the trade notice No. 92 of 1961 dated April 27, 1961, the millshad failed to segregate cotton fabrics produced fro duty-paid and non-duty-paid yarn and had also failed to maintain separate accounts in respect thereof as directed therein. This petition is directed against the correctness of these two orders.;