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1995 Supreme(Kar) 555
Karnataka High Court
Judges : B.Padmaraj,M.L.Pendse
ASSOCIATED CEMENT COMPANIES LIMITED - Appellant
Versus
UNION OF INDIA - Respondent
WP 499 Of 1992
Decided On : 11/10/1995
Advocates Appeared :
S.G.SUNDARASWAMY, V.MUKUND MENON
The main legal point established in the judgment is that the third show-cause notice issued by the Collector of Central Excise was without jurisdiction and based on unsustainable grounds, and therefore, was set aside by the court.
Headnote:
Central Excise - Associated Cement Companies Limited - Companies Act, 1956, Central Excise and Salt Act, 1944 - Central Excise Tariff Act - The court discussed the exemption notification under the Central Excise Rules and the issue of whether the Phase-II unit of the company was entitled to the benefit of the exemption. The court found that the company had disclosed all relevant material particulars to the excise authorities in support of the claim that the Phase-II unit was a separate factory entitled to avail of the benefit under the exemption notification. The court held that the third show-cause notice issued by the Collector of Central Excise was without jurisdiction and based on unsustainable grounds, and therefore, set aside the judgment of the learned Single Judge and allowed the petition.
Fact of the Case:
The Associated Cement Companies Limited, engaged in the manufacture of cement, set up a factory with a second plant known as Phase-II. The company claimed the benefit of exemption under the Central Excise Rules for the cement manufactured in the Phase-II plant.
Finding of the Court:
The court found that the company had disclosed all relevant material particulars to the excise authorities in support of the claim that the Phase-II unit was a separate factory entitled to avail of the benefit under the exemption notification. The court held that the third show-cause notice issued by the Collector of Central Excise was without jurisdiction and based on unsustainable grounds.
Issues: The issues included the entitlement of the Phase-II unit to the benefit of exemption under the Central Excise Rules and the validity of the third show-cause notice issued by the Collector of Central Excise.
Ratio Decidendi: The court held that the third show-cause notice was without jurisdiction and based on unsustainable grounds, and therefore, set aside the judgment of the learned Single Judge and allowed the petition.
Final Decision: The appeal was allowed, the judgment of the learned Single Judge was set aside, and the petition was allowed. There was no order as to costs.
( 2 ) THE appellant No. 1, The Associated Cement Companies Limited, is a company registered under Companies Act, 1956 and is engaged in the manufacture of cement. The company had set-up a factory at Wadi Gulbarga district of State of Karnataka some time in the year 1968. The factory initially had a capacity to manufacture 4 lakh Metric Tonnes of cement and subsequently it was increased to 6 lakh Metric tonnes. The manufacture of cement is liable to payment of excise Duty under the provisions of Central Excise and Salt Act, 1944.
( 3 ) THE country experienced serve shortage of cement in Nineteen Eightees and government of india was keen on the manufacturers setting up new factories for increasing production of cement. The Government of India had offered various incentives and concessions to the manufacturers of cement. Relying upon the assurance given by Government of India, the company set up second plant known as Phase-II in the Factory in July, 1982 and capacity was 10 lakh Metric Tonnes. The manufacture of cement commenced in July, 1982 in the second plant of the Company. On 29-4-1987 the Government of India in exercise of powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, exempted cement falling under sub-heading no. 2502. 20 of the Schedule to the Central Excise Tariff Act, from so much of duty of excise leviable thereon, as is in excess of the amount calculated at the rate of Rs. 205 per tonne. The notification required that exemption is available provided cement is manufactured in a factory, which had commenced production during the period commencing from January 1, 1982 and ending with March 31, 1986. It is not necessary to refer to the other requirements for availing of the benefit of exemption. The notification was to remain in operation till March 31, 1990.
( 4 ) AS the Company had commenced production of cement in the Factory in July, 1982 and was entitled to the benefit of exemption under the notification, the Company informed the Assistant collector of Central Excise, Gulbarga that refund application will be filed shortly. The Company filed classification list claiming that the Company is eligible for the benefit available under the notification. The Company addressed two letters dated October 7, 1987 and December 14, 1987 to the Collector of Central Excise setting out in detail the reasons why the second plant, where production commenced in July, 1982, is a factory entitled to the benefit of exemption notification. The Company pointed out that the investment for the second plant was to the tune of rs. 100 crores and the second plant has a far larger capacity than the original plant. The company also pointed out that a separate Industrial Licence for the second phase was applied for. The Company asserted that second phase plant is altogether a new plant, machinery and equipment of which are completely new. The Company also informed that a separate Central excise Licence for the new plant was already sought for. The Company, therefore, requested that appropriate order should be passed informing the Assistant Collector that benefit of exemption notification is available in respect of manufacture of cement in the Phase-II plant. The request was reiterated by another letter dated December 14, 1987. On February 15, 1988, the Additional Collector, Central Excise, Belgaum informed the company that the Collector Excise, Belgaum has found that the benefit under exemption notification shall be admissible in respect o
