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SUPREME COURT OF INDIA
D.A. DESAI AND AMARENDRA NATH SEN, JJ.
Collector of Customs and Central Excise and another, Appellants
Versus
Oriental Timber Industries, Respondents.
Civil Appeal No. 21 of 1971, D/- 26-3-1985.
Advocates appeared
Mr. V. C. Mahajan, Sr. Advocate; Mr. N. S. Das Bahl, Mr. R. N. Poddar, Advocates with him, for Appellants; Mr. P. K. Pillai for Mr. A. G. Pudissery, Advocate, for Respondents.
Central Excises and Salt Act, 1944 – Section 3, 2(g) - Central Excise Rules - Rule 49(1), 49, 9 - Manufacture of Plywood – Levy of Excise Duty - Respondent is a manufacturer of plywood circles to be used as component parts of packing materials for wire and cables - Respondent used to be assessed to duty on basis of total area of circles manufactured and duty used to be collected when circles were issued out of factory premises - An audit objection was taken to this mode of assessment of excise duty on ground that process of cutting out circles and punching of holes cannot be considered as incidental or ancillary to completion of manufacture of plywood - Audit objection pointed out that levy of excise duty must be on total area of blocks or panels of plywood that came out of press and not on area of circles made out of blocks or panels - It was further indicated that by plywood it was meant only plywood which had a general market and not plywood, circles specially manufactured for particular purpose or a particular customer - In consequence of audit objection, Range Officer, Central Excise, appellant No. 2 herein, issued a notice to M/s. Oriental Timber Industries, respondent in appeal, calling upon respondent to furnish area of plywood manufactured at panel stage for taking clearance of plywood circles - Whether plywood manufactured by Respondent and utilised by respondent in manufacturing plywood circles to be used as component parts of packing material for wire and cables is exigible to excise duty – Held, Excess amount Which Union of India is likely to recover from respondent firm is not likely to be a very substantial sum from point of view of Unions financial position and will not be of any material gain to the Union of India but may very likely spell doom for respondent firm - Apart from this aspect, it appears that no assessment for all these years on basis of said notices had been made or could have been made - To make fresh assessment for imposition of duty for so many years after such a long lapse of time may require a prolonged exercise which may not ultimately be worth trouble, so far as Union of India is concerned and is bound to cause a great deal of hardship and harassment to respondent firm - In these circumstances, Court feel that ends of justice require that there should be no levy of excise duty on basis of said notices for years which have already passed in view of court judgment and court judgment allowing appeal and holding notices to be valid should be given effect to prospectively from now on and not retrospectively – Court may observe that counsel for Union of India fairly agreed that this should be the just course to adopt and counsel fairly submitted that Union of India was not concerned with collection of additional duty for years already passed from respondent firm but was merely concerned with question of law involved in this case - Appeal allowed.
Judgment
AMARENDRA NATH SEN, J. :- The question for consideration in this appeal by Special Leave is whether the plywood manufactured by the Respondent and utilised by the respondent in manufacturing plywood circles to be used as component parts of packing material for wire and cables is exigible to excise duty under the Central Excises and Salt Act, 1944.
2. The respondent is a manufacturer of plywood circles to be used as component parts of packing materials for wire and cables. The Respondent used to be assessed to duty under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) on the basis of the total area of the circles manufactured and the duty used to be collected when the circles were issued out of the factory premises. On 13-2-1967 an audit objection was taken to this mode of assessment of excise duty on the ground that the process of cutting out circles and punching of holes cannot be considered as incidental or ancillary to the completion of the manufacture of plywood. The audit objection pointed out that the levy of excise duty must be on the total area of blocks or panels of plywood that came out of the press and not on the area of the circles made out of the blocks or panels. It was further indicated that by plywood it was meant only plywood which had a general market and not plywood, circles specially manufactured for particular purpose or a particular customer. In consequence of the audit objection, the Range Officer, Central Excise, Irinjalakuda, the appellant No. 2 herein, issued a notice on 22-2-1967 to M/s. Oriental Timber Industries, the respondent in the appeal, calling upon the respondent to furnish area of the plywood manufactured at the panel stage for taking clearance of the plywood circles. By this notice the Range Officer also mentioned that the assessment of the plywood circles would be made at the panel stage and not on the finished circles and directed M/s. Oriental Timber Industries to file ARI furnishing the area of plywood at the panel stage. In the notice dated 22-2-1967 issued by the-Range Officer, the Range Officer had also mentioned that the said notice was issued as the Collector of Customs had ordered that the assessment of plywood circles would be made at the panel stage and not on the finished circles.
3. For the sake of convenience we shall describe the Range Officer, Central Excise, Irinjalakuda who happens to be the second appellant before us as the Range Officer and we shall refer to the Collector of Customs and Central Excise, Cochin, the first appellant before us, as the Collector and M/s. Oriental Timber Industries, the writ petitioner before the High Court and the respondent before us in this appeal, will be described as the firm.
4. The firm sent a reply to this notice on 23-2-1967 through the lawyer asking for a copy of the order of the Collector referred to in the notice of the Range Officer. It further appears that the Advocate, of the firm had also addressed a letter on 24-2-1967 to the Collector, requesting the Collector for a copy of the order. No copy of the order was furnished to the firm or the Advocate and instead the Range Officer on 24-2-1967 issued a further notice to the firm reiterating the stand earlier taken in the notice dated 22-2-1967 and this notice dated 24-2-1967 further directed that duty paid on plywood panels cleared outside the factory could not be brought back for further process of cutting circles without obtaining prior permission.
5. On 28-2-1967 the firm filed a writ petition in the High Court in which the validity of the aforesaid notice was challenged and obtained an order of stay of the operation of the aforesaid notices. The writ petition came up for final hearing on 27-3-1969. A learned Single Judge of the High Court passed an order to the effect that the Collector of Customs would issue a copy of the order referred to in the notice of the Range Officer dated 22-2-1967 within a month from that date and on receipt of that
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