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High Court Of Calcutta
G. N. Ray
MADURA COATS LIMITED - Appellant
Versus
COLLECTOR OF CENTRAL EXCISE - Respondent
Civil Rule 7833 (W) Of 1976
Decided On : 09/01/1978
EXCISE - Nylon and rayon warp sheets - Whether excisable items - Held, warp sheets are nylon and rayon yarns and not new products - Petitioner entitled to exemption under notification dated 30th April, 1975.
Fact of the Case:
Petitioner company arranged nylon or rayon yarn supplied by customers in parallel rows loosely held together by cotton yarn supplied by the petitioner company. The petitioner contended that the warp sheets were not excisable as they were yarn and had already been taxed under Item 18 of the First Schedule of the Central Excises and Salt Act, 1944. The respondents contended that the warp sheets were a separate item of manufacture and were liable to excise duty under Item 68 of the First Schedule.
Finding of the Court:
The court found that the warp sheets were nylon and rayon yarns and not new products. The court also found that the petitioner was entitled to exemption under a notification dated 30th April, 1975, which exempted goods falling under Item 68 of the First Schedule manufactured in a factory as a job work from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work.
Issues: 1. Whether nylon and rayon warp sheets are excisable items? 2. Whether the petitioner is entitled to exemption under the notification dated 30th April, 1975?
Ratio Decidendi: 1. The court held that the warp sheets were nylon and rayon yarns and not new products. The court relied on the fact that the warp sheets were made by arranging nylon or rayon yarn in parallel rows loosely held together by cotton yarn. The court also relied on the fact that the warp sheets were known in the commercial world as nylon and rayon yarns. 2. The court held that the petitioner was entitled to exemption under the notification dated 30th April, 1975. The court found that the petitioner had met the criteria under the explanation to the notification, which stated that "the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker by the supplier and that article is returned by the job worker to the supplier, after the articles have undergone the intended manufacturing process, on charging only for the job work done by him."
Final Decision: The court made the rule absolute and vacated all interim orders. The court also directed that the petitioner would be entitled to withdraw the deposits made by the petitioner company in terms of the interim order passed by the court.
( 1 ) IN the instant writ petition the petitioner prays for issue of a writ in the nature of certiorari requiring respondents Nos. 1, 2 and 3 to transmit and certify the records of the proceedings before them to this Court in the matter of determining as to whether nylon and rayon wrap sheets produced by the petitioner company are excisable items and their orders made in such proceedings including the orders dated 24th March, 1975 and 6th February, 1976 so that they are quashed or set aside. The petitioner company also prayed for a writ in the nature of prohibition prohibiting respondents from treating nylon or rayon warp sheets produced by the petitioner company as excisable items and also prohibiting the respondents from demanding, levying or collecting any excise duty in respect of such nylon or rayon warp sheets. The petitioner also prayed for a writ in the nature of mandamus prohibiting the respondents from treating nylon or rayon warpsheets arranged or assembled by the petitioner company as excisable items and/or demanding, levying or collecting any excise duty in respect of such nylon or rayon warp sheets.
( 2 ) THE petitioner's case, in short, is that the petitioner is required by some of its customers to arrange nylon or rayon yarn supplied by such customers in parallel rows loosely held together by cotton yarn supplied by the petitioner company. Such arrangement of rayon or nylon is called a Tyre cord warp sheets. The petitioner states that to make a warp sheet, the petitioner first winds the nylon or rayon yarn supplied by its customers into bobbins. The yarn is then twisted in a twisting machine and thereafter used as a warp on a loom, cotton yarn being used at widely spaced intervals as a weft to hold the nylon or rayon yarn in position. According to the petitioner, a given length of warp sheets consists of 99. 4% nylon and 0 6% cotton and excepting the process as stated hereinbefore, no manufacturing process is involved in making warp sheets and no new commodity known to commerce or industry comes into being when yarn is arranged or assembled to form a warp sheet. The petitioner also contends that under the definition given by the Indian Standards Institution, yarn is a generic term for an assemblage of fibre or filament, either natural or artificial twisted or laid together, to form a continuous strand suitable for use in weaving, knitting or otherwise inter-twisting to form textile fabrics. In the writ petition a sample length of such warp sheet was also annexed being Ext. "a". The petitioner contended that the nylon and rayon yarn are liable to a duty of Central Excise under the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) and such yarn falls under Item 18 of the First Schedule of the Act. The cotton yarn is also liable to such duty and falls under Item I8a of the said First Schedule. According to the petitioner, the warp sheets being yarn and not any other commodity are not excisable once more. The petitioner also contended that as. a matter of fact, the excise authorities also proceeded on such basis in connection with the warp sheets produced by the Madura Mills Company Limited at Madurai and the said view of the excise authorities will appear from a letter dated ! 5th of March,. 1957 from the Inspector of Central Excise to Madura Mills Company Limited, a copy whereof is also annexed to the writ petition being marked as annexure T.
( 3 ) THE petitioner company also contended in the writ application that Madura Mills Company Limited also made cotton warp sheets, which is cotton yarn instead of nylon or rayon yarn arranged or assembled in the same way, and such warp sheets were held to ba yarn by the High Court at Madras in the case of Madura Mills Company Limited v. Government of Madras, reported in 25 Sales Tax Cases, page 407. The petitioner contended that despite the aforesaid position, the Excise Authorities in West Bengal wrongly proceeded on the footing with
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