V.S.KOKJE, J. - (1.) THE petitioner company claiming to be entitled to the benefit conferred by Notification No. 36/98, dated 10 -12 -1998, which came into force from 16 -12 -1998 filed a declaration dated 16 -12 -1998 with the Assistant Commissioner, Central Excise Division, Gandhi Nagar, Bhilwara stating that the petitioner had started working under the said notification as independent processor from 16 -12 -1098. The petitioner company also submitted to the Assistant Commissioner a declaration under Notification No. 42/98, dated 10 -12 -1998 giving the required details. It appears that the petitioner company started clearing the goods availing the benefit of Notification No. 36/98 from 16 -12 -1998 onwards. On 3042 -1998 office of the Commissioner of Central Excise, Jaipur -II wrote to the petitioner in response to the declaration given by the petitioner on 16 -12 -1998 that the Process House for which the declaration was made was owned by M/s. Suzuki Textile Ltd., a Company having proprietary interest in weaving of fabrics also and as the preliminary enquiries conducted by the Department revealed that M/s. Suzuki Textile Ltd. are the processor of fabrics in the factory, till the matter was settled, the request of the petitioner company for determination of the Annual Production in their favour under the scheme could not be entertained. On the same day, the Superintendent, Central Excise, Range -II, Bhilwara wrote to the petitioner enclosing a copy of the letter of the Commissioner's office and advising the petitioner company to follow the directions given in the letter and to clear the excisable goods accordingly. The short levy, if any, on the past clearance was also demanded to be deposited.
(2.) ON 4 -1 -1999 the petitioner filed this petition challenging the aforesaid direction given by the Central Excise Authorities and praying that the impugned letter dated 30 -12 -1998 of the Additional Commissioner and the letter dated 30 -12 -1998 of the Superintendent, Central Excise, Range -II, Bhilwara be quashed. A writ of mandamus directing the Additional Commissioner, respondent No. 1 to entertain the declaration filed by the petitioner and to determine the annual capacity of production of the petitioner's Process House in its favour was also claimed with a prayer that the petitioner be allowed to clear goods availing the benefit of Notification No. 36/98, dated 10 -12 -1998. An interim order was sought from and granted by this court allowing the clearance under the Notification on condition that the petitioner shall keep true and correct accounts of the clearance of goods to enable the respondents to realise the differential duty in case the petition fails. The respondents moved an application under Article 226(3) for vacation of the interim order. When the arguments on the application were being heard, the parties agreed that the case be disposed of finally by hearing arguments at that stage only. This is how the case was finally heard by us. The short point involved in the case is as to whether the respondents could refuse to allow the petitioner to clear the goods treating the petitioner as independent processor of fabrics under Notification No. 36/98, dated 10 -12 -1998 even before deciding finally as to whether they are covered under the notification or not. The contention of the petitioner is that they are covered by the notification issued by the Central Govt, in exercise of powers conferred on it by Section 3A of the Central Excises and Salt Act, 1944 (hereinafter called as the Act) and therefore the excise duty, they are liable to pay, is under Notification No. 36/98, dated 10 -12 -1998 issued in exercise of powers conferred by Section 3A of the Act. According to the petitioner company, it is not liable to pay duty under Section 3 of the Act being covered by a Notification issued under Section 3A of the Act. The petitioner company also contends that whether it is covered by Notification or not can only be determined after issuing a show cause notice to it as to why its claim be not rejected and after adjudicating upon the cause shown by it. According to the petitioner the respondents themselves have not reached a conclusion finally that the petitioner company is not independent processor and therefore, is not covered by the Notification No. 36/98, dated 10 -12 -1998. The action taken by the respondents therefore, according to the petitioner, is premature and without authority of law as the Act or the Rules made thereunder do not provide for such a procedure. It is also contended on behalf of the petitioner company that it is independent processor of fabrics though it does not own the plant and machinery but has taken the same on lease. The petitioner company is registered under the Rajasthan Sales Tax Act, Central Sales Tax Act and has independent telephone connections . It also contends that the Superintendent, Central Excise, Range -II, Bhilwara himself issued a certificate of registration in Form No. R -2 on 3 -9 -1997 in the petitioner company's favour accepting it to be an independent unit under Rule 174 of the Central Excise Rules. It is also alleged in the petition that though under the job contract between M/s. Suzuki Textile Ltd. and the petitioner company, the petitioner company is obliged to process the entire fabrics of M/s. Suzuki Processors on priority basis, the petitioner company is free to process the fabrics of other parties and the company has been actually processing the fabrics of other parties. It is also alleged that the petitioner company has been regularly submitting price declaration and monthly returns in Form No. RT 12 to the Range Superintendent, Central Excise and has been paying regularly excise duty on fabrics processed by it from time to time and the Superintendent had accepted the payment of excise duty made by the petitioner without raising any objection. It is contended that the respondents have never doubted that the petitioner company was an independent processing unit. The petitioner also pointed out that the respondents themselves have issued a show cause notice to M/s. Suzuki Textile Ltd. alleging that they have transferred capital goods on which they had availed Modvat credit to another manufacturer namely the petitioner. The respondents demanded from M/s. Suzuki Textile Ltd. duty on capital goods transferred/removed after being used to the petitioner company. According to the petitioner, this clearly shows that the Department has all along treated the petitioner's unit as an independent processing unit, different and separate from M/s. Suzuki Textile Ltd. The petitioner therefore claimed that it is independent processor even in the eyes of the Central Excise Department and therefore it is covered by Notification No. 36/98, dated 10 -12 -1998 and is liable to pay duty only under Section 3A of the Act and not under Section 3 of the Act.
(3.) IN reply it is contended on behalf of the respondents that the petitioner could claim to be covered under Notification No. 36/98 only after its declaration was accepted by the department and not before that. It was submitted that the department had, on investigation, found out material to support the contention that the petitioner company was not independent processor as it had virtually no capital assets, it did not own any land, building, plant or machinery and all these have been taken on lease from M/s. Suzuki Textile Ltd. It was also contended that the entire goods processed by the petitioner company either belong to M/s. Suzuki Textile Ltd. or goods of other manufacturers sent for processing by M/s. Suzuki Textile Ltd. to the petitioner company for processing. It is submitted that the petitioner company is only an instrumentality of M/s. Suzuki Textile Ltd. and is used only as a facade for the purpose of avoiding excise duty.;