- (1.) The petitioner is a private limited company under the Indian Companies Act, 1956. The petitioner in the course of its business manufactures woollen yarn spun from wool known as shoddy. By an amendment introduced by the Finance Act, 1961, Item 18-B was introduced in the 1st Schedule of the Central Excises and Salt Act, 1944 to the following effect : JUDGEMENT_44_LAWS(CAL)3_19731.html
(2.) Thereafter, the Central Government by a notification dated 1st of March, 1961 issued under Rule 8(1) of the Central Excise Rules exempted woollen yarn spun from wool commonly known as shoddy from the whole of excise duty leviable thereon. The said notification is in the following terms : "In exercise of the powers confered under sub-rule (1) of the Rule 8 of the Central Excise Rules, as in force in India and as applied to the State of Pondicherry the Central Government hereby exempts woollen yarn spun from wool commonly known as shoddy from the whole of excise duty leviable thereon."
(3.) Item 18-B of the 1st Schedule of the Central Excises and Salt Act was amended with effect from 24th of April, 1962. By the said amendment the rates of duty on woollen yarn were enhanced from 10% ad valorem to 15% ad valorem in case of worsted yarn and from 5% ad valorem to 7 and half percent ad valorem in case of others. The Central Government thereafter by a notification dated 24th of April, 1962 issued under Rule 8(1) of the Central Excise Rules provided that instead of full exemption from duty, woollen yarn spun from wool, commonly known as shoddy, would be exempt from so much of the excise duty leviable thereon as was in excess of 25 naya paise per kilogram. Thereafter, by a notification dated 27th of July 1963 woollen rags imported from foreign countries were exempted from customs duty leviable thereon. On 21st of May, 1965 a trade notice being No. 39/woollen -Yarn- 2/65, dated 21st May, 1965 was issued by the Collector of Central Excise to the following effect : "Attention is invited to the Government of India, Ministery of Finance (Department of Revenue), Notification No. 42/62, dated 24-4-1962. For the purpose of assessment and clearance shoddy yarn must conform to the following specification: (i) It should be spun out of shoddy wool i.e. wool retrieved from woollen rags, cuttings etc. (ii) It should contain not less than 80% of wool fibres. (iii) A tolerance upto 20% of non-wool fibres namely other textile fibres like rayon, art silk, silk, cotton etc., including the admixture of virgin wool not exceeding 5% (within the prescribed limit of 20% ) can be allowed. In order to ensure that there is no abuse of the concessional rates of duty prescribed in respect of woollen yarn spun from wool commonly known as shoddy, the manufacturers shall be required to undertake the process of mixing shoddy wool with other raw materials under Central Excise Supervision. They shall also be required to maintain an operation card in the enclosed proforma.";