TAMIL NADU HANDLOOM WEAVERS COOPERATIVE SOCIETY LTD Vs. GOVERNMENT OF INDIA

JUDGEMENT

(1.) THE petitioner is a society registered under the Tamil Nadu Co-operative Societies Act LIII of 1961. It has a manufacturing unit at Cuddalore in which cotton fabrics are woven. It ha also another unit called the yarn and cloth processing centre at Erode. Under the Central Excises and Salt Act, 1944 manufacture of cotton fabrics is liable to excise duty. By Notification No. 47 of 1962, dt. 24th April, 1962, the Central Government exempted unprocessed cotton fabrics falling under Item No. 19 of the First Schedule to the Central Excises and Salt Act if manufactured on a handloom, from the whole of the duty liveable thereon. The petitioner society, as one, manufacturing handloom fabrics falling under Item No. 19, therefore, under the said Notification, was exempt from excise duty in respect of cotton fabrics woven in the Cuddalore unit. By two other Notifications, Nos. 111 an d 112 of 1962, dt. 13th June., 1962, the Central Government, in exercise of their powers under r. 8 of the Central Excise Rules, 1944, provided for levy at concessional rate in respect of processed fabrics made from grey fabrics when processed by an independent processor. The concession consisted of two parts. In respect of the first 20,000 sq. metres of cotton fabrics cleared, the goods were exempt from the whole of excise duty; and in respect of those in excess of 20,000 sq. metres, a concessional rate of duty at four-fiftieths of the normal rate was levied. But these two Notifications were subject to the condition that the processing was done by an "in dependent processor" . The words "independent processor" is defined in the Notification as meaning a manufacturer, who is engaged exclusively in the processing of cloth with the aid of power, and who has no proprietary interest in any factory engaged in the spinning of yarn or weaving of cotton fabrics there is no dispute that the petitioner-society is engaged in processing of cloth with the aid of power. But the only dispute is whether the petitioner-society has any proprietary interest in any "factory".

(2.) THE Assistant Collector of Central Excise, Erode, considered that the existence of its factory in Cuddalore, where weaving cotton fabrics is done, would disentitle the petitioner-society to the concessional levy. He accordingly issued a notice to the petitioner on 27th April, 1962, stating that since the petitioner-society is not an "independent processor" within the meaning of the definition in the Notification, , it would not be entitled to the concessional levy and that the levy and collection of excise duty at the concessional rate was a mistake. He accordingly demanded that the difference between the normal rate of duty and the amount collected at the concessional rate from the petitioner-society for the period from 14th April, 1962 to 4th March, 1963, which amounted to Rs. 1,42,767.10 be paid by the petitioner. He also ordered that the petitioner-society is liable to pay duty at the normal rate from 5th March, 1966.

(3.) SO far as the subsequent period is concerned, the petitioner has paid duty at the normal rate under protest and claimed the benefit of the Notifications. The assistant Collector of Central Excise held that since handloom fabrics which are woven in the Cuddalore factory of the petitioner-society are exciable goods coming under Item No 19 of the first Schedule to the Act, the petitioner is not an "independent processor" within the meaning of that term in the Notification and that therefore it is not entitled to concessional levy. That order of the Assistant Collector was confirmed by the Collector of Central Excise and by the Government of India ultimately.