KATIHAR JUTE MILLS LTD. Vs. THE INSPECTOR OF CENTRAL EXCISE AND OTHERS

JUDGEMENT

(1.) Whether the cess leviable under Sec. 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 Bench. Equally at issue is the correctness of the views expressed by the Division Bench in Rameshwar Jute Mills Ltd. v/s. The Inspector of Customs & Central Excise & others ( : 1980 PLJR 403). 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 Sec. 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 licenced to do so under the Rules. The jute industry being one specified n the Schedule to the Act, a cess can be levied under Sec. 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 Sec. 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 January, 1980 to challenge such levy. Basic reliance on their part was on : 1980 PLJR 403 (supra).

(2.) 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. 'case on behalf of the respondents on the basis of E.K. Cotton Spinning & Weaving Mills and another v/s. Union of India and other (Civil Writ No. 1858 of 1981 decided on 11th January, 1982). Noticing the conflict of precedent and the significance of the issue involved, the matter was referred to a larger Bench for an authoritative decision.

(3.) The claim of the petitioner, however, has now to be viewed in the context of the radical changes in the law brought about subsequent to the filing of the writ petition. Sec. 30 of the Act authorises the Central Government to make rules for carrying out the purposes of the Act and in pursuance of that power the Jute Manufacturers Cess Rules, 1976 have been promulgated. Rule 3 of the said Rules in terms provides for the application of the Central Excises and Salt Act as also the Rules framed there under in relation to the levy and collection of the case on jute manufacturers. It is not in dispute that the Finance Act of 1982 introduced a radical amendment in rules 9 and 49 of the Central Excise Rules, 1944. What is even more significant is that by virtue of Sec. 51 of the Finance Act, 1982 retrospectivity has been given to these amendments with effect from 1944. It is thus common ground that the amendment of rules 9 and 49 of the Central Excises Rules, 1944 and the express Retrospectivity given to them have brought about a fundamental change in the relevant provision of the law, whereby the removal of excisable goods is complete even if they are captively consumed in the continuous process of manufacture. Faced with this fair accompli, a feeble attempt has now been made on behalf of the petitioner to challenge the validity of the amendments in rules 9 and 49 aforesaid and equally the retrospectivity accorded to them by the Finance. Act.