Decided on May 13,1970

UNION OF INDIA Respondents


K.L.Roy, J. - (1.) No amount of ingenious arguments by the learned Counsel for the respondents could convince me that this application should be rejected on any of the grounds urged by him. The petitioner, Dalhousie Jute Co. Ltd., is a well-known company owning and manufacturing jute goods in its miffs at Champdani in the district of Hooghly. In 1960 a plant for the production or laminated jute goods by processing jute cloth or bags with waterproof polythene coated paper, gum tapes and other packaging items was installed in the petitioner's mill premises. It is claimed in the petition that this Converter Division was an entirely separated and segregated unit from the petitioner's jute mills but this is streneously denied in the affidavit-in-opposition where it is claimed that the said Converter Unit is situated within the petitioner's jute mills premises, having the same entrance and exit and was part of the said mills. The petitioners claims that for the purpose of processing jute goods in its Converter Plant, it used to obtain supplies of such jute goods from other jute mills and also took such jute goods from its own mills at Champdani. By Section 16 of the Finance Act, 1962 Entry 22A was introduced in the First Schedule to the Central Excises and Salt Act, 1944. The said item was as follows:-- 22A.-- Jute manufactures (including manufactures of bimplipatam jute or of mesta fibre), all sorts of (i) hessian .... Rs. 250 /- per metric tonne (since increased to Rs. 450/-); (ii) all other descriptions of jute manufactures not otherwise specified (including cloth bags, twist yarn, rope and twine) .... Rs. 125/- per metric tonne (since increased to Rs. 250/-).
(2.) The petitioner's case is that since, the imposition of Excise Duty on Jute manufactures it had been purchasing jute goods from other mills on which Excise Duty had already been paid. So far as supplies obtained from the petitioner's own mill were concerned. Excise Duty was being paid on the same being transferred from the petitioner's jute mill to the Converter Unit.
(3.) Disputes and differences arose between the petitioner and the Central Excise Collector as to whether Excise Duty was payable on the laminated jute goods produced by the petitioner in its Converter Unit. An order in writing dated the 21st November, 1903 No. VI-Jute-21-4-62/12508, was addressed, inter alia, to the petitioner describing the subject of the communication as "jute manufactures -- lamination of jute manufactures in the Converter Division of Messrs. Dalhoushie Jute Mills." By the said order the petitioner was intimated, inter alia, that the Converter Division being located on the same floor and under the same roof as the spinning and weaving and other departments of the petitioner's mills and both having a common entrance and exit, the petitioner's contention that the Converter Unit was a distinct and separate manufacturing department could not be accepted. The petitioner was further referred to an order of the Collector of Central Excise, West Bengal dated the 21st February, 1963 wherein it had been ordered that if special treatment, such as, lamination or polythene lamination of jute cloth was done within the factory of manufacture and if the weight of jute in such product was not less than 40 per cent, of the total weight, duty would be charged on the basis of the weight of the laminated products. The petitioner was accordingly informed that so far as the laminated jute goods produced from jute supplied by its own mills duty would be charged on the basis of the weight of the final produce after lamination. So far as the jute cloth brought from other mills for lamination was concerned two options were offered to the petitioner, namely, (i) The petitioner could bring the cloth in bond in which case it would have to pay duty on the total weight of the laminated cloth on its clearance from the Dalhousie Jute Mills, or (ii) The petitioner might bring the cloth from other mills on payment of duty in which case no further duty would be chargeable after the cloth had been laminated. The choice was left entirely to the petitioner. In the final paragraph of the said order the petitioner was notified that if it felt aggrieved by the order it could file an appeal to the Collector of Central Excise, West Bengal, Calcutta within three months under Section 35 of the Central Excises and Salt Act, 1944. This letter was signed by Sri K. L. Rekhi, Assistant Collector. The petitioner did file a petition of appeal against the aforesaid order to the Collector of Central Excise, Calcutta which was summarily rejected by the Collector by his order dated the 3rd June, 1964 on the ground that he saw no reason to interfere with the order of the Assistant Collector. The petitioner was further notified that a revision lay from the appellate order to the Central Government under Section 36 of the Act. The petitioner did file a revision application dated the 1st July, 1964 to the requisite authority, viz., the Ministry of Finance (Department of Revenue) and by its order dated the 11th February, 1965 the revision application was also summarily rejected. By a notification dated the 20th March, 1965 made under Rule 8 (1) of the Central Excise Rules the Government of India exempted laminated jute products from so much of the -duty leviable thereon as was in excess of the duty payable on unprocessed jute manufactures used in the manufacture of jute products. The said notification came into effect from the 20th March, 1965. A notice of demand dated the 9th October, 1967 for a total sum of Rs. 6,40,068.01 was demanded from the petitioner towards Central Excise Duties (basic "and special) on the differential weight of the jute manufactures received from outside and cleared after lamination during the period from 11-1-63 to 19-3-65. This notice of demand was purported to have been made under Rule 10A of the Central Excise Rules, 1941. Annexed to the aforesaid notice was a chart showing how the amount of this demand has been calculated. The chart showed the various items, such as D. W. tarpaulin, hessian, sacking etc. which had been taken for lamination, the rate at which the duty had been paid, the weight of the quantity obtained after lamination, the gain in lamination on which duty is chargeable arid then there are details as to the basic, special and the total amount of duty. In the fifth column with the heading "Gain in Lamination" the difference between the weight of the laminated product and the weight of the jute manufactures purchased from outside mills is shown and the duty is charged on this difference in weight. Various representations were made by the petitioner against the aforesaid demand which were unsuccessful and ultimately a letter demanding justice was sent by its solicitors, Messrs. Fowler and Co., to the Excise authorities on the 20th May, 1968 and this Rule was obtained from this Court on the 28th May, 1968 calling on the respondents, the Union of India (through the Collector of Central Excise, Calcutta), the Assistant Collector of Central Excise, Calcutta and the Inspector of Central Excise stationed at the mill premises of the petitioner to show cause why the respondents should not be prohibited from giving any effect to the purported notice of demand dated the 9th October, 1967 and from taking any further steps or proceedings in furtherance of or in pursuance of the said notice and also why the purported notice of demand as well as the decision dated the 30th March, 1960 rejecting the petitioner's representation against the aforesaid demand should not be quashed.;

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