VENKATARAMIAH, J. - (1.) THE Judgment of the court was delivered by
(2.) THIS appeal by certificate under Article 133(1)(a) of the Constitution is filed against the judgment and order dated 10/07/1969 in Special Civil Application No. 624 of 1964 on the file of the High court of Gujarat filed under Article 226 of the Constitution by M/s The Atul Products Ltd., the respondent in this appeal. The respondent is the owner of a factory at Atul in the State of Gujarat in which it has been carrying on the business of manufacturing dyes, chemicals and pharmaceuticals for a number of years. By the Finance Act of 1961 "synthetic organic dyestuffs (including pigment dyestuffs) and synthetic organic derivatives used in any dyeing process" were added as Item 14-D in the First Schedule to the central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') with effect from 1/03/1961 and consequently the respondent became liable to pay excise duty imposed by the Act on two of its products known as cibagenes and cibanogenes which were being manufactured by it by virtue of S. 3 of the Act which provided that excise duty prescribed by the Act was leviable on all excisable goods specified in the First Schedule to the Act. Item 14-D in the First Schedule during the relevant period read thus: 14-D. Synthetic organic dyestuffs (including pig- Thirty per cent dyestuffs) and synthetic organic derivatives used ad valorem. in any dyeing process. But on 23/11/1961, the central government issued a notification under Rule 8(1) of the central Excise Rules, 1944 (hereinafter referred to as 'the Rules') exempting the dyes specified in the Schedule annexed thereto from the whole of the excise duty leviable thereon if and only if such dyes had been manufactured from any other dye on which excise duty or countervailing customs duty had already been paid. The notification read thus : government OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) 80 New Delhi, dated 23/11/1961 Agrahayana 2, 1883 S.E. NOTIFICATION central Excise GSR. In exercise of the powers conferred by sub-rule (1) of Rule 8 of the central Excise Rules, 1944, as in force in India, and as applied to the State of Pondicherry, the central government hereby exempts the dyes specified in the schedule annexed hereto, falling under Item No. 14-D of the First Schedule to the Central Excises and Salt Act, 1944 (I of 1944) from the whole of the excise duty leviable thereon if and only if, such dyes are manufactured from any other dye on which excise duty or counter- vailing customs duty has already been paid. SCHEDULE 1. Solubilised Vats, 2. Rapid fast colours, 3. Rapidogenes, 4. Fast Colour Salts. (180/61) Sd. (BN. Banerji)
(3.) IT may be stated here that cibagenes and cibanogenes which were being manufactured by the respondent belong to the class of dyes referred to in the Schedule annexed to the above-said notification. After the above notification was issued, the respondent wrote a letter dated 22/12/1961 to the Superintendent of Excise, Bulsar Division, Bulsar which read as follows: Dear Sir, You are aware that under the Notification No. 180/6 1/11/1961 issued by the government of India, Min. of Finance (Dept. of Revenue), Rapidogenes/Rapid fasts and fast colour bases are exempted from the excise duty provided such dyes are manufactured from other dyes on which excise duty or countervailing customs duty has already been paid. During the course of discussions we had on 20/12/1961 with the Collector of central Excise and yourself, we pointed that we purchase fast colour and bases, required in the production of Rapidogenes/Rapid fasts either from the manufacturer in Bombay or from the open market. The material which the local manufacturer has offered us was produced before the imposition of excise duty on dyes. He is, therefore, willing to sell us the material without the recovery of excise duty. We now propose 81 to pay the excise duty on the fast colour bases which we will purchase from the local manufacturer so that we do not have to pay excise duty on the final products produced viz. Rapidogenes/Rapid fasts. Similarly we propose to purchase some quantity of imported fast colour bases from the open market. We will present the materials thus purchased to you for the recovery of excise duty at the rate of 15%. We have now to request you to advise your Inspector at Atul to accept the excise duty on the fast colour bases, which we will purchase either from the local manufacturer or from the open market. Thanking you in mean while, we remain. Yours faithfully, for the Atul Products Ltd. Sd. (S.K. Soman) The Superintendent of central Excise, Bulsar Division, Bulsar sent a reply dated 4/01/1962 to the above letter stating that there was no objection to the payment of excise duty on fast colour bases purchased by the respondent and that if evidence of payment of excise duty on fast colour bases was produced the dyes manufactured by using those fast colour bases would not be liable to duty under the notification referred to above. He also instructed the Deputy Superintendent of central Excise to receive duty on such fast colour bases which went into the production of cibagenes or cibanogenes (processed dyes) by the respondent. The respondent accordingly paid the duty and was exempted from payment of duty on cibagenes and cibanogenes manufactured by it. The departmental audit party later on noticed that the concession shown to the respondent was not in order since it was only when duty had been paid on the basic dyes at the time of their manufacture when they were chargeable to duty and they had been purchased by the respondent thereafter, the respondent would get exemption from the duty payable on the products manufactured by it by employing such basic dyes. The audit party was of the view that the respondent which had purchased the basic dyes at the time when (sic no) duty was leviable on them could not claim exemption from payment of excise duty on the final products manufactured by it by using such basic dyes, by voluntarily paying duty on the basic dyes after 1/03/1961 in accordance with law in force then. The audit party was further of the view that there was short levy of excise duty on account of the above mistake since the respondent had paid excise duty on the basic dyes at 30% ad valorem 82 whereas it was liable to pay duty at 30% ad valorem on the products manufactured by it which were costlier than the basic dyes. The Assistant Collector of central Excise at Surat therefore issued five notices under Rule 10-A of the Rules to the respondent all on 20/05/1964 calling upon it to show cause as to why the deficit amount of excise duty should not be recovered in respect of the excisable goods manufactured by it at different periods before that date. We reproduce below one of such notices, the contents of which were more or less the same except with regard to the amount claimed and the number of the relevant demand notice: INTEGRATED DIVISIONAL OFFICE: CUSTOMS AND central EXCISE, SURAT No. VI(RR) 21-13/62/II/(iv) Surat, 20/05/1964 NOTICE Whereas it has been reported that M/s Atul Products Limited, Atul have manufactured synthetic organic dyes namely Cibagenes and Cibanogenes from basic dyes lying in stock as on February 28, 19 6/03/1961 with them/purchased from the market and having voluntarily paid duty on all such basic dyes in stock/purchased from the market as referred to above manufactured and cleared from 23/11/1961 onwards the processed dyes (final product) without payment of duty at the time of clearance from their factory. 2. The Deputy Superintendent, central Excise. Atul has raised demand No. 10175 dated 6/01/1964 for the amount of Rs. 2930-22 for the recovery of duty as a result of the assessment of the final processed dyes: because the processed dyes were not eligible for exemption from duty on the ground that duty was voluntarily paid on the basic dyes which were in stock/purchased from the market as on 28/02/1961 when such payment of duty on the stock of basic dyes as on 28/02/1961 was not warranted. 3. M/s Atul Products Ltd., Atul have represented this dispute vide their letter No. SL/437/9581 dated 25/03/1964 against Demand No. 10175 dated 6/01/1964. 4. M/s Atul Products Ltd., Atul should show cause to the undersigned as to why the demand referred to above issued by the Deputy Superintendent, central Excise. Atul should not be on fired. 5.M/s Atul Products Ltd., Atul are further directed to produce at the time of showing cause all the evidence upon which they intend to rely in support of their defence. 83 6. M/s Atul Products Ltd., Atul should also indicate in the written explanation whether they wish to be heard in person before the assessment dispute is finalised. 7. If no cause is shown against the action proposed to be taken within ten days of the receipt of this notice or they do not appear before the undersigned when the case is posted for hearing the case will be decided ex parte. Sd. H.H. Dave 20/05/1964 Assistant Collector. ;