KATIHAR JUTE MILLS LTD Vs. INSPECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) Whether the cess leviable under Section 9 of the Industries (Development and Regulation) Act, 1951 can be lawfully imposed on jute twine and jute yarn in the process of manufacture, is the significant question necessitating this reference to the Full Beach. Equally at issue is the correctness of the views expressed by the Division Bench in Rameshwar Jute Mills Ltd. v. Inspector Customs & Central Excise-1981 E.L.T. 30 1980 Pat. L.J.R. 403.

(2.) In view of the recent amendment of Rules 9 and 49 of the Central Excise Rules, 1944 (hereinafter to be referred to as the 'Rules'), which have been accorded retrospectivity with effect from 1944 by the express mandate of Section 51 of the Finance Act, 1982, it becomes somewhat unnecessary to delve into the facts in any depth. It suffices to mention that the petitioner Katihar Jute Mills Ltd.-are manufacturing diverse jute products including sacking, hessian, jute twine and jute yarn in their factory premises, and are duly licensed to do so under the Rules. The jute industry being one specified in Schedule to the Act, a cess can be levied under Section 9(1) of the said Act read with the Central Excises and Salt Act, 1944 and the Rules framed thereunder. The gravamen of the petitioner's case is that jute twine and yarn in a continuous process of manufacture in their mill directly go to the weaving section for weaving and hemming and their ultimate conversion into hessian or sacking goods. Therefore, jute twine and yarn are not manufactured or marketable products nor are they removed from the premises of the factory as such, with the significant result that they are not liable to any excise duty or cess thereon. Nevertheless the respondent excise authority had created demands against the petitioner on the basis of quantity of jute twine and yarn consumed within the factory in the manufacture of jute goods with effect from April, 1976. Aggrieved thereby, the petitioner had preferred this writ petition way back on the 4th of the January, 1980 to challenge such levy. Basic reliance on their part was on (Supra).

(3.) This writ petition was originally heard by a Division Bench but before the reserved judgment could be rendered, a pointed challenge was laid to the ratio of Rameshwar Jute Mills Ltd.'s case (1981 Tax. L.R. N.O.C. 11) (Pat.) on behalf of the respondents on the basis of J.K. Cotton Spinning & Weaving Mills v. Union of India [Civil Writ No. 1858 of 1981 decided on 11th January, 1982 by the Delhi High Court-1983 E.L.T. 239 (Del.)]. Noticing the conflict of precedent and the significance of the issue involved, the matter was referred to a larger Bench for an authoritative decision.