(1.)This is an application under Article 226 of the Constitution by British Paints (India) Ltd. The petitioner is an Indian Company carrying on business as manufacturer of divers paints, colours, varnishes, pigments, enamels, synthetic washable distemper and allied products. The petitioner for its business owns and operates a factory at No. 14 and 15, Swarnamoyee Road, Post Office, Botanic Gardens, near Calcutta. The products manufactured by the petitioner are sold in the market under its different brand names. In or about 1955 paints, Varnishes etc. came under the levy of Central Excises & Salt Act, 1944 under the Tariff Item No. 14 within the broad head 'Chemicals'. The said item reads as follows :-
"14. Pigments, colours, paints, enamels, varnishes, Blacks and Cellulose Lacquers -
(2.)Between 1955-1965 a variety of paste distemper called "Murus Oil bound distemper" used to be manufactured by the petitioner from vegetable oil. In 1965 the petitioner company started manufacturing a new product called "Bison Latex Paste Distemper White (4748)". It is the case of the respondents that the said product, viz., "Bison Latex Paste Distemper White" on examination by chemical examiner was found to be Plastic Emulsion Paint classifiable under Item 14.1(3)(iv) of Central Excise Tariff. The petitioner company objected to the said classification but, according to the respondents, on further examination the same was found to be Plastic Emulsion Paint as classifiable under the tariff item and thereafter the petitioner company discontinued the manufacture of the said product. It is the case of the petitioner that the said products has no connection with the product which the petitioner-company started manufacturing in 1971. In 1971 the petitioner-company started manufacturing "Bison Synthetic Washable Distemper" the production of which was taken up on the ground that 1965 product was an improved quality paste distemper and a competitive substitute for oil bound distemper and was classifiable under Tariff Item 14.1(3)(ii). According to the petitioner 1965 product was based on Polyvinyl Acetate Latex whereas the petitioner-company's latter product is based on "Water Dispersible Synthetic Resin". In 1965 product Polyvinyl Acetate Latex was the binder whereas Water Dispersible Synthetic Resin (Alkyd Resin) together with small percentage of Polyvinyl Copolymic (1% - 2%) is the binder for the 1971 product. It has been, further, stated on behalf of the petitioner that the price of the 1965 product was not attractive to the purchasers and therefore it had lost its commercial viability and as such manufacture of the said product was discontinued by the petitioner. In August, 1967 the Superintendent of Central Excise prepared a market enquiry report based upon enquiries made in the year 1966 on the petitioner-company's product, viz., Parrot plastic compound which, according to the report, was used by the users thereof on the roofs of Bungalows and other quarters to stop leakages and also to stop leakages on the roofs and bodies of the wagons before painting these. It is the case of the petitioner that in October, 1971 the petitioner started manufacturing a kind of paint known as "Bison Synthetic Washable Distemper" and started clearing the product under self-removal procedure as embodied in Chapter VIIA of the Central Excise Rules, 1944 from its factory at Howrah under Tariff Classification No. 14.1(5) that is to say, "Pigments, Colours, Paints and Enamels, not otherwise specified" declaring the product in Form No. 1 under Rule 173B of the Central Excise Rules. In or about February, 1972 sample of the aforesaid product was drawn by the Excise Inspector for chemical analysis. On 13th March, 1972 the Superintendent of Central Excise approved the classification list in respect of the petitioner's new product under Item No. 14.1(5) until further orders subject to chemical test and classification thereof. Sometimes in July, 1972 the petitioner-company requested the Sector Officer to sign necessary document as required under the provisions of Central Excise Rules relating to an export consignment of about 40 Kgs. of the said new product. The Sector Officer refused to sign the said document on the ground that the said new product should be classified under Tariff Item 14.1(3)(IV). On 1st/2nd August, 1972 the Sector Officer, Central Excise wrote a letter to the petitioner stating as follows :
"Please refer to the above Memo under which "Bison Synthetic Washable Distemper" was sent to Chemical Examiner, Calcutta, for test and observing correct Tariff Classification. The sample, in question, has been classified as Plastic Emulsion Paint assessable under T.C. No. 14.1(3)(iv) against party's declaration as paint under T.C. No. 14.1(5). Please transfer this product to T.C. No. 14.1(3)(iv) since the beginning and furnish the total quantity cleared so far to enable this office to raise demand of the differential duty."
(3.)On the 7th August, 1972, the petitioner-company wrote a letter to the Assistant Collector, Central Excise, inter alia, as follows :-
"It is a clear Paster Distemper, is a stiff paste form which can be easily cut with a knife and which cannot be brushed off to any surface by itself and we are at a loss to understand how it can be classified as 'Plastic Emulsion Paint'. Hence we beg to appeal and contest this decision of the Sector Officer. Meanwhile, as we have some export orders to Nepal of this product and we did not like to jeopardise our despatches, we are paying duty under T.C. No. 14.1(3)(iv) under protest showing equivalent quantity in litre at the side of quantity in Kg. as mentioned in the Gate Passes."