Judgment

DUTT, J. :- This appeal is directed against the judgment of the Delhi High Court allowing in part only the petition of the appellants under Art. 226 of the Constitution.

2. Appellant 1, J. K. Cotton Spinning and Weaving Mills Limited, has a composite mill wherein it manufactures fabrics of different types. In order to manufacture the said fabrics yarn is obtained at an intermediate stage. The yarn so obtained is further processed in an integrated process in the said composite mill of appellant 1 for weaving the same into fabrics. The appellants do not dispute that the different kinds of fabrics which are manufactured in the mill are liable to payment of excise duty on their removal from the factory. They also do not dispute their liability in respect of yarn which is also removed from the factory. It is the contention of the appellants that no duty of excise can be levied and collected in respect of yarn which is obtained at an intermediate stage and, thereafter, subjected to an integrated process for the manufacture of different fabrics. Indeed, on a writ petition of the appellants, the Delhi High Court by its judgment dated October, 16, 1980 held that yarn obtained and further processed within the factory for the manufacture of fabrics could not be subjected to duty of excise. It is the case of the appellants that in spite of the said decision of the Delhi High Court, the Central Board of Excise has wrongly issued a circular dt. Sept. 24, 1980 purporting to interpret Rr. 9 and 49, Central Excise Rules, 1944 (hereinafter referred to as the Rules) and directing the subordinate excise authorities to levy and collect duty of excise in accordance therewith. In the said circular, the Board has directed the subordinate excise authorities that "use of goods in manufacture of another commodity even within the place / premises that have been specified in this behalf by the Central Excise Officers in terms of the powers conferred under R. 9 of the Rules, will attract duty. As the said circular was being implemented to the prejudice of the appellants, they filed a writ petition before the Delhi High Court, inter alia. challenging the validity of the circular.

3. During the pendency of the writ petition in the Delhi High Court, the Central Government by a Notification No. 20/82-C.E. dt. 20-2-1982 amended Rules 9 and 49 of the Rules. Section 51, Finance Act. 1982 provides that the amendments in Rr. 9 and 49 of the Rules shall be deemed to have, and to have always had the effect on and from the date on which the Rules came into force, i.e. Feb. 28, 1944. After the said amendments of the Rules with retrospective effect, the appellants amended the writ petition and challenged the constitutional validity of S. 51, Finance Act, 1982 and of the amendments to Rr. 9 and 49 of the Rules.

4. The High Court came to the conclusion that S. 51 and Rr. 9 and 49 of the Rules, as amended. were valid. It has, however, been held that the retrospective effect given by S. 51 will be subject to the provisions of Ss. 11A and 11B, Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). Further, it has been held that the yarn which is produced at an intermediate stage in the mill of the appellants and subjected to the integrated process of weaving the same into fabrics will be liable to payment of excise duty in view of the amended provisions of Rr. 9 and 49 of the Rules. But the sized yarn which is actually put into the integrated process will not again be subjected to payment of excise duty for the unsized yarn, which is sized for the purpose, does not change the nature of the commodity as yarn. The writ petition was, accordingly, allowed in part. Hence this appeal by the appellants upon a certificate granted by the High Court.

5. At this stage, we may refer to Rr. 9 and 49 before and after amendment of the same. The relevant portion of R. 9 before the same was amended is as follows :-

"Rule 9. Time and manner of payment of duty. - (1) No ex