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High Court Of Calcutta
Ruma Pal
BONGAIGAON REFINERY AND PETROCHEM.LTD. - Appellant
Versus
COLLR OF C (A) - Respondent
Civil Order 10412 (W) Of 1991
Decided On : 04/23/1992
CENTRAL EXCISES AND SALT ACT - SECTION 35F - WAIVER OF PRE-DEPOSIT - VALIDITY OF COLLECTOR'S ORDER - INTERPRETATION OF NOTIFICATION - MEANING OF 'FACTORY' - RELEVANCE OF GATE PASSES - FINANCIAL HARDSHIP - DISCRETION OF APPELLATE AUTHORITY.
Fact of the Case:
The petitioner, a Government of India Undertaking, manufactured Petroleum, Petrochemical, and Petrochemical-based products in a large area of 3.926 square kilometers encircled by a boundary wall. The subject matter of the petitioner's appeal was a Notification under which the petitioner claimed exemption for goods utilized in the factory for the manufacture of other goods or as fuel for such manufacture. The Excise Authorities initially allowed the exemption but later changed their minds and held that the three units were separate factories, and the utilization of Refinery Gas in the Xylene and Polyester Staple Fibre Unit did not come within the exemption notification. The petitioner's application for dispensing with the deposit as a pre-condition to preferring an appeal was rejected by the Appellate Authority.
Finding of the Court:
The Collector misdirected himself in law by incorrectly interpreting the notification in question and the decisions cited before him. The Collector equated the word 'premises' with buildings in the definition of 'factory' in Section 2(e) of the Act, which was not supported by any basis. The Collector failed to consider the inter-related and inter-dependent activities of the petitioner's units, as well as the fact that the petitioner had been granted one factory license under the Factories Act for the entire area. The gate passes produced by the respondents, showing the removal of excisable goods for consumption within the factory, did not support the respondents' submission that the three units were separate factories. The petitioner had a strong prima facie case to contend that the refinery gas and LSHS manufactured in the refinery were utilized in the same factory by servicing as fuel in the Xylene and Polyester Staple Fibre Unit. The Collector did not consider whether the interest of the revenue would be jeopardized if the pre-deposit were waived and failed to exercise his discretion in favor of the petitioner, particularly when the revenue's interest was not said to be un-safeguarded.
Issues: 1. Whether the Collector correctly interpreted the notification in question and the decisions cited before him? 2. Whether the Collector erred in equating the word 'premises' with buildings in the definition of 'factory' in Section 2(e) of the Act? 3. Whether the Collector considered the inter-related and inter-dependent activities of the petitioner's units and the grant of one factory license under the Factories Act for the entire area? 4. Whether the gate passes produced by the respondents supported their submission that the three units were separate factories? 5. Whether the petitioner had a strong prima facie case to contend that the refinery gas and LSHS manufactured in the refinery were utilized in the same factory? 6. Whether the Collector considered whether the interest of the revenue would be jeopardized if the pre-deposit were waived? 7. Whether the Collector exercised his discretion in favor of the petitioner, particularly when the revenue's interest was not said to be un-safeguarded?
Ratio Decidendi: 1. The Collector's interpretation of the notification and the decisions cited before him was incorrect. 2. The Collector erred in equating the word 'premises' with buildings in the definition of 'factory' in Section 2(e) of the Act. 3. The Collector failed to consider the inter-related and inter-dependent activities of the petitioner's units and the grant of one factory license under the Factories Act for the entire area. 4. The gate passes produced by the respondents did not support their submission that the three units were separate factories. 5. The petitioner had a strong prima facie case to contend that the refinery gas and LSHS manufactured in the refinery were utilized in the same factory. 6. The Collector did not consider whether the interest of the revenue would be jeopardized if the pre-deposit were waived. 7. The Collector failed to exercise his discretion in favor of the petitioner, particularly when the revenue's interest was not said to be un-safeguarded.
Final Decision: The impugned order of the Collector was set aside, and the Collector, Central Excise (Appeals) was directed to entertain and decide the appeal in accordance with the law by dispensing with the requirement of pre-deposit of the amount of Excise Duty and penalty in dispute subject to the continuance of the undertaking given to this court by the petitioner.
( 1 ) THE question involved in this Writ Petition is whether the Appellate Authority had properly exercised its discretion under Section 35f of the Central Excises and Salt Act, 1944, in rejecting the petitioner's application for dispensing with the deposit as a pre-condition to the petitioner's preferring an appeal.
( 2 ) THE petitioner is a Government of India Undertaking and a manufacturer of Petroleum, Petrochemical and Petrochemical based products. The admitted facts are that the petitioner has a large area covering 3. 926 square kilometers encircled by a boundary wall at Dhaligaon. With this area the petitioner has a refinery as well as other units producing, inter alia, Xylene and Polyester Staple Fibre.
( 3 ) THE subject matter of the petitioner's appeal is a Notification under which the petitioner claims exemption. That Notification which is Notification No. 28/89-C. E. , dated 1-3-1989 reads as follows :"exemption to goods other than blended or compounded lubricating oils and greases - In exercise of the powers conferred by Sub-section (1) of section 5a of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods (other than blended or compounded lubricating oils and greases) falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced in a factory and - (a) utilised in the factory in which the said excisable goods are produced, for the manufacture of any goods falling under the said Schedule or as fuel for such manufacture (excluding fuel used for any internal combustion engine) or both; or (b) allowed to escape in the atmosphere by flare system or otherwise; from the whole of the duty of excise leviable thereon which is specified in the said Schedule. "
( 4 ) IT is the petitioner's case that the Refinery Gas from the Refinery Unit is used partly in the Refinery Unit itself and partly consumed as fuel in the Xylene and Polyester Staple Fibre Unit. The Xylene produced in the Xylene Unit is used Polyester Staple Fibre Unit to produce Polyester Staple Fibre. It is therefore contended that the Refinery Gas utilised in the Polyester Staple Fibre Unit and Xylene Unit was exempted from payment of duty of excise because it utilised in the factory of the petitioner in which the Refinery Gas had, in fact, been produced.
( 5 ) THE Excise Authorities had initially held that the three units separately described above formed one factory and allowed the petitioner the benefit of the notification. Subsequently, however, the Excise Authorities changed their minds and came to the conclusion that the three units were in fact separate factories and that the utilisation of the Refinery Gas not being in the same factory did not come within the "exemption notification". Being aggrieved by this decision of the Excise Authorities the petitioner preferred an appeal. The petitioner also filed an application for stay of the demand raised by the Excise Authorities on the ground that the petitioner was not entitled to the benefit of the notification. The Collector of Central Excise (Appeals) however, refused to dispense with the requirement for deposit under Section 35f of the Act. Being aggrieved by that decision, the petitioner moved a Writ Application before this Court (referred to as the first Writ Application ).
( 6 ) THE first writ application was disposed of by this Court by a Judgment dated 11th June, 1991. The detailed facts relating to this case have already been set out in that judgment. The court set aside the order of the Collector of Central Excise (Appeals) on the ground that the Collector had not properly addressed himself to the definition of the word "factory" in the Act nor had he considered the decisions cited by the petitioner before him in determining the merits of the petitioner's case. The matter was accordingly remanded back to the Collector (Appeals) direc
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