H.N.SETH, J. - (1.) BY this petition under Article 226 of the Constitution, petitioner M/s. Flocks (India) P. Ltd. seeks quashing of the order of the Central Government dated 23rd January, 1978 as also that of the order passed by the Assistant Collector, Central Excise, Kanpur dated 3rd November, 1979. The petitioner further prays for a suitable writ commanding the respondents to levy excise duty on the goods manufactured by it in accordance with Tariff Item No. 19 -1 and to refund the excess duty charged from it under Tariff Item No 19 -111 of the Central Excise Tariff. Petitioner commenced production of flocked valvet, flocked suede and other flocked fabrics with effect from 1st January, 1976. The manufacturing process employed by the petitioner consists of applying adhesive to some cotton based cloth and thereafter processing the same through flocking chamber where flocksare attached to the sticky based cloth by electrostatic force of over one lakh volt. The fabric is then subjected to certain other processes and the entire process from beginning to the end is an integreted continuous process. There was a controversy between the. petitioner and the Central excise authorities with regard to the question as to whether duty payable by the petitioner on the flocked material produced by the petitioner was to be computed under Item No. 19 -111 of the Central Excise Tariff or under Item No. 19 -1 or under Item No. 68 thereof. Whereas the contention of the petitioner was that the said material was dutiable under Item No. 19 -1 or Item No. 68 of the Tariff Manual; the department claimed that the duty in respect thereof was to be levied under Item No. 19 -111 of the Central Excise Tariff. Items No. 19 -1 and 19 -111 of the Tariff run thus : - _________________________________________________________________________________ 'Item Description of goods Rateofduty - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - No. Basic Additional Handloom duty duty cess (1) (2) (3) (4) (5) __________________________________________________________________________________ 19 -I Cotton fabrics other than (i) Twenty per Five per One rupe embroided in the piece, in cent ad cent ad and nine strips or in motifs and (ii) valorem valorem paise per fabrics impregnated, coated sq. metre or laminated with preparat - ions of cellulose derivatives or of other artificial plastic materials. II * * * * III Cotton fabrics impregnated, The duty The duty The hand - coated or laminated with for the for the loom cess preparations of cellulose time being time being for the time derivatives or of other arti - leviable leviable being levi ficial plastic materials. on the on the able on the base fab - base fab - base fabrics rics, if not rics, if not if not alalready already ready paid plus paid. paid.' thirty per cent ad valorem.
(2.) THE Assistant Collector, Central Exicse did not accept petitioner's plea and held that the product manufactured by the petitioner fell under item No. 19 -111 of the Tariff and was dutiable accordingly. The petitioner then went up in appeal before the Collector, Central Excise who upheld the order of the Assistant Collector. Aggrieved, the petitioner took the matter in revision before the Central Government which, vide its order dated 23rd January, 1978, observed thus : - 'The base fabric before flocking is coated with acrylic emulsions, which is an artificial plastic material. Government of India, in the circumstances, observed that before the fabric in question undergo the flocking operation those become coated fabrics within the meaning of the Central Excise Tariff item 19 -111 and attract duty at that stage. As it may not be possible to pay the duty on those coated fabrics under tariff item 19 -IH before those are removed for flocking process the duty may be paid at subsequent stage after flocking is done. If, however, the cost in respect of the flocking operation can be separately identified this should be excluded for the purpose of assessable value of the fabrics in question when finally cleared. Subject to the above observation of the Government the revision application is otherwise rejected.' It thus appears that according to the Central Government, duty under tariff item No. 19 -IH was payable by the petitioner on the value of the fabric as and when it was coated with the material to which the flocks were subsequently attached. It appears that the persons concerned with the industry of manufacturing flocked material made certain representations to the Government of India with regard to the item under which the product manufactured by them was to be dutiable. Accordingly a meeting of the Collectors of Central Excise was convened by Government of India on 1st December, 1978 and it was resolved that flocked fabric was liable to excise duty under item No. 19 -1 of the Central Excise Tariff and not under item No. 19 -111. The Central Government by trade notices No. 7/79, dated 12th January, 1979 (Chandigarh Collectorate) parallel to Calcutta No. 7/79, dated 15th January, 1979, Cochin No. 18/79, dated 23rd January, 1979 and Kanpur Collectorate trade notice No. 17/79, dated 25th January, 1979, made it clear that the flocked fabric is liable to duty under item No. 19 -1 of the tariff. The respondents have filed a copy of the deliberations made at the tariff conference held in the year 1978 as Annexure CA.l. to the counter affidavit sworn by Saheb Singh, Assistant Collector, Central Excise, Division I, Kanpur which indicates that the respondents accepted the position that while manufacturing flocked material the resin treatment to the base fabric has a limited shelf and is not marketed per se; the coating process is incidental to subsequent flocking; thus the fabric flocked partly or all over cannot entir'ely depend on the preliminary process of coating which is only incidental to the flocking; and decided that the fabric flocked all over would for purposes of levy of duty fall under tariff item No. 19 -1 and not under tariff item No, 19 -III.
(3.) IMMEDIATELY after issue of the aforementioned trade notices the petitioner applied to the Assistant Collector, Central Excise, Kanpur pointing out that the goods manufactured by it should be classified as falling under tariff item No. 19 -1 and they be made liable to excise duty accordingly. The Assistant Collector, Central Excise, Kanpur, vide his order dated 9th May, 1979 informed the petitioner that its goods shall be cleared under tariff item No. 19 -1 since 1st December, 1978 and that the classification list duly approved was being sent to the Superintendent, Central Excise M.O.R.V., Kanpur for information and necessary action. On receipt of the order dated 9th May, 1979, the Assistant Collector, Central Excise, Kanpur started collecting duty in respect of the goods manufactured by the petitioner in accordance with tariff item No. 19 -1. The petitioner also made an application for refund of the excess amount of excise duty realised from it in the past under alleged mistaken view of law. However, on 3rd November, 1979 the Assistant Collector, Central Excise informed the petitioner thus : - 'In supersession of this office letter C. No. V(19)/(17) (27)/79/7346, dated 10th May, 1979, you are hereby informed that the Government of India's orders in revision F. No. 195/B/14/39/77 -CX -V, dated 23 -1 -1978 will be operative ab initio in regard to the classification of flocked fabrics whereby your flocked fabrics would fall under Tariff Item 19 -111 instead of 19 -1, though the duty liability will be restricted to the stage of coating only, if separately identified.' ;