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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE MOHAN
Tamil Nadu Betelnut Packers - Appellant
Versus
Union of India - Respondent
Case No : W.P. Nos. 10412 to 10416 of 1985
Decided On : 09 January 1986
CENTRAL EXCISES AND SALT ACT - CLASSIFICATION - SCENTED BETEL-NUT POWDER - TARIFF ITEM 3-A - NOT PAN MASALA - REFUND OF EXCISE DUTY - CONDITIONS.
Fact of the Case:
The petitioners, manufacturers of scented betel-nut powder, challenged the classification of their product as Pan Masala under Tariff Item 3-A of the Central Excises and Salt Act, 1944, and sought a refund of the excise duty paid under protest.
Finding of the Court:
The court held that the petitioners' product, scented betel-nut powder, could not be classified as Pan Masala under Tariff Item 3-A because it did not meet the definition of Pan Masala, which required it to be commonly known as Pan Masala.
Issues: 1. Whether scented betel-nut powder falls under Tariff Item 3-A of the Central Excises and Salt Act, 1944? 2. Whether the petitioners are entitled to a refund of the excise duty paid under protest?
Ratio Decidendi: 1. The court interpreted Tariff Item 3-A and held that the definition of Pan Masala required it to be commonly known as Pan Masala, which the petitioners' product was not. 2. The court held that the petitioners were entitled to a refund of the excise duty paid under protest, subject to the condition that they had not passed on the excise duty to the customers.
Final Decision: The court allowed the writ petitions, quashed the impugned demand and show cause notice, and directed the Assistant Collector to decide whether the petitioners had passed on the excise duty to the customers. If the Assistant Collector found that the excise duty had not been passed on to the customers, the petitioners were entitled to a refund.
All these writ petitions can be dealt with in a common judgment since all of them raise an identical issue as to the classification, though, of course the prayers may vary depending upon the circumstances of the case. I will briefly refer to the facts in W.P. 10412 of 1985 to highlight the point involved. The writ petitioner is a company having its office in Madras. The company is a contractor for Grane Betel-nut powder. There is no manufacture or preparation. Therefore, it is claimed that no excise duty is leviable.
2.The petitioners were asked to take out a licence for the purpose of excise duty on 10-4-1985, which licence was accordingly taken. The company has furnished a bond under B-2 on the date when it took out a licence to the Superintendent, Central Excise, Madras-1, Dn, for a sum of Rs. 5, 000/- and Rs. 1, 000/- towards deposit as security. Further, they had furnished B-15 bond to the Government binding themselves for Rs. 25, 000/- towards security deposit. The petitioners have paid an excise duty of Rs. 1, 27, 560 to the Excise Department, under protest on various dates.
3.The petitioners' product is called Crane Nut Powder. It is commonly known in Telugu as Crane Wakkapudi, and in Tamil as Kokku Pakku.
4.Under Tariff No. 68 supari item was exempt from the whole of the duty of excise. This exemption came to be granted under Circular No. 17/75, dated 27-5-1985. Claiming the product of the petitioners as Pan Masala, excise duty is sought to be levied by the respondents. The said Pan Masala is defined as Tariff item 3-A. It contains three parts. The first part gives the contents and its description; and second part talks of the mode of sale, i.e., in unit containers, while the third part clearly states that it should be commonly known as Pan Masala. The petitioners claim that having regard to the price variations and further having regard to the fact that Pan Masala is different from scented supari in shape and in preparation also by the commonly known name, the writ petition has come to be preferred stating that the product of the petitioners would not fall under Tariff Item 3-A.
5.On 30-8-1985 the Central Excise Inspector Group I B, Madras-I Division, gave a notice demanding a sum of Rs. 1, 14, 960/-, and a show cause notice issued by the Assistant Collector on 9-9-1985. It is this show cause notice and the demand that are questioned on the above ground. Under these circumstances, the relief that is prayed for is certiorarified mandamus to quash the demand of the fifth respondent, dated 30-8-1985, and refund of the excise duty, along with other deposits. The other writ petitioners are manufacturers of Supari. Writ Petition No. 10413 of 1985 is for amandamusfor refund of the amount paid, after a declaration that the product of the petitioner does not fall under Tariff item 3-A. Similarly is the relief in W.P. No. 10414 of 1985. Writ Petition No. 10415 of 1985 is for quashing the proceedings of the fourth respondent under O.C. No. 448/85, dated 19-3-1985 whereby the petitioner has been called upon to take L.4 Licence. In W.P. No. 10416 of 1985 a demand notice has been issued to the petitioner therein, dated 31-8-1985, demanding excise duty, which is sought to be quashed and the consequential relief of refund is prayed for.
6.The learned Counsel for the petitioners urges first of all it is impossible to hold that Tariff Item 3-A will govern the products of the petitioners herein. Pan Masala is totally a different commodity than scented betel-nut powder. The price varies between the two. The method of manufacture varies. Merely because scented betel-nut powder is in containers, it cannot be called as Pan Masala. In any event, it is not commonly known in the market as Pan Masala. Therefore, wherever there is a demand made on the petitioners, it is liable to be quashed because the most essential thing is the product of this kind, though, no doubt, the Excise Department has a power to classify one way or the other, i
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