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1989 Supreme(Ori) 275
IN THE HIGH COURT OF ORISSA
V. Gopalswamy, G.B. Patnaik, JJ.
STRAW PRODUCTS LIMITED AND ANOTHER - APPELLANT
Versus
ASSTT. COLLR. CE AND CUS. AND ANOTHER - RESPONDENT
Writ Petition No. 2490 of 1987
Decided On : 29-03-1989
The Revenue is estopped from taking a stand that it is not liable to refund an amount where it has itself stated in an application for stay before the Supreme Court that the natural consequence of the judgment of the High Court was that the Revenue would refund the amount in question.
Headnote:
CENTRAL EXCISE - REFUND - WRAPPING PAPER - PROFORMA CREDIT - DUTY PAID ON WRAPPING PAPER USED FOR PACKING OTHER VARIETIES OF PAPER - REFUND OF DUTY PAID - LEGALITY - INTERPRETATION OF EARLIER JUDGMENT OF HIGH COURT - AVAILABILITY OF ALTERNATIVE REMEDY.
Fact of the Case:
The petitioner, a company engaged in the business of manufacturing and producing paper, including wrapping paper, challenged the order of the Assistant Collector, Central Excise & Customs, rejecting its application for refund of duty paid on wrapping paper used for packing other varieties of paper. The petitioner claimed entitlement to the refund pursuant to the judgment of the High Court in an earlier writ petition, which had directed the authorities to allow proforma credit in respect of the duty paid on wrapping paper.
Finding of the Court:
The High Court held that the Assistant Collector had misconstrued the earlier judgment of the High Court and that the Revenue was estopped from taking a stand that it was not liable to refund the amount. The Court found that the petitioner was entitled to proforma credit in respect of the wrapping paper used for wrapping other varieties of paper and that the Revenue was not entitled to levy duty again on the same while determining the duty payable on the finished product. The Court also held that the petitioner's claim for refund was merely a consequential relief and that the Assistant Collector was unjustified in rejecting the claim on an erroneous interpretation of the earlier judgment.
Issues: 1. Whether the Assistant Collector had correctly interpreted the earlier judgment of the High Court in rejecting the petitioner's application for refund? 2. Whether the Revenue was estopped from taking a stand that it was not liable to refund the amount? 3. Whether the petitioner was entitled to proforma credit in respect of the wrapping paper used for wrapping other varieties of paper? 4. Whether the Revenue was entitled to levy duty again on the same while determining the duty payable on the finished product? 5. Whether the petitioner's claim for refund was merely a consequential relief? 6. Whether the Assistant Collector was justified in rejecting the claim on an erroneous interpretation of the earlier judgment?
Ratio Decidendi: 1. The High Court held that the Assistant Collector had misconstrued the earlier judgment of the High Court in rejecting the petitioner's application for refund. The Court found that the earlier judgment had clearly declared that the petitioner was entitled to proforma credit in respect of the wrapping paper on which duty had been paid and which was utilized for wrapping the other finished goods and that the Revenue could not levy duty again on the same while determining the duty payable on the finished product. 2. The Court also held that the Revenue was estopped from taking a stand that it was not liable to refund the amount, as it had itself stated in an application for stay before the Supreme Court that the natural consequence of the judgment of the High Court was that the Revenue would refund the amount in question. 3. The Court further held that the petitioner was entitled to proforma credit in respect of the wrapping paper used for wrapping other varieties of paper, as the Revenue was not entitled to levy duty again on the same while determining the duty payable on the finished product. 4. The Court also held that the petitioner's claim for refund was merely a consequential relief, as it was a necessary consequence of the earlier declaration of the High Court that the petitioner was entitled to proforma credit in respect of the wrapping paper.
Final Decision: The High Court allowed the writ petition and directed the Assistant Collector to adjust the excess duties illegally collected from the petitioner on wrapping paper from 16th of March, 1976, which wrapping paper was subjected to duty once and again became subjected to duty when was used for wrapping other varieties of paper.
JUDGMENT :
G.B. Patnaik, J. - The order of the Assistant Collector, Central Excise & Customs, Sambalpur Division, dated 1.6.1987 (Annexure-1) rejecting the application of the petitioner-company for refund, which it claims to be entitled pursuant to the judgment of this Court dated 17.10.1985, reported in Straw Products Limited and Another Vs. The Superintendent, Central Excise and Others, is under challenge in this writ application.
2. The petitioner No. 1 is the Company engaged in the business of manufacture and production of paper. It also manufactures several varieties of paper including wrapping paper which falls under Tariff Item No. 17 of the First Schedule to the Central Excises & Salt Act, 1944 (hereinafter referred to as the "Act"). The wrapping paper so manufactured by the Petitioner-Company is utilised in its factory for packing other varieties of paper and paper boards. From 1972 onwards the Central Excise authorities required the petitioner to pay the duty on the wrapping paper before using the same for wrapping other varieties of paper at the time of clearance and the petitioner did pay the duty thereon. From 16.3.1976 ad valorem duty was levied on paper. As a result of the aforesaid levy, the petitioner was required to pay the duty again on the wrapping paper which was used for packing the other varieties of paper. The petitioner, therefore, to avoid the burden that was being put twice so far as the wrapping paper was concerned made a request to the Excise authorities for permission to remove the wrapping paper, in the first instance, without payment of duty to be allowed to avail the benefit of proforma credit under Rule 56-A of the Central Excise Rules, 1944 (hereinafter referred to as the "Rules"). The Assistant Collector of Central Excise & Customs by his order dated 21.11.1983 intimated the petitioner that the petitioner's request for availing proforma credit under Rule 56-A could not be acceded to since in his opinion the wrapping paper when used as a packing material could not be construed either as a raw material or a component. The petitioner, therefore, approached this Court in a writ petition being O.J.C. No. 1128 of 1984. In the said writ petition, the petitioner prayed that the order of the Assistant Collector rejecting its request to allow proforma credit in respect of duty paid on wrapping paper be quashed and a direction be issued to the opposite parties to allow the said proforma credit in respect of the duty already paid as provided under Rule 56-A of the Rules.
The stand of the Revenue in the writ application was that the process of packing was not a process of manufacture and in that view of the matter, Rule 56-A could not have any application to the packing materials. According to the Revenue, the said Rule would apply only to such of the raw materials or the component parts which are notified under the Rules. Since packing was a separate process different from the process of manufacture of core paper and as the wrapping paper was not used for its own convenient distribution but for the distribution of other varieties of paper, Rule 56-A could not have any application.
This Court by judgment dated 17.10.1985 came to the conclusion that Rule 56-A provided for allowing a rebate in respect of the duty-paid product when the same had been utilised for more convenient distribution of the finished product and since the Company manufactured wrapping paper and paid excise duty for it, when the same wrapping paper was utilised for more convenient distribution of the finished product or other varieties of paper, the petitioner was entitled to the relief as provided under Rule 56-A of the Rules. Accordingly, the orders of the excise authorities rejecting the petitioner's prayer were quashed and a writ of mandamus was issued to opposite party no. 2 to allow proforma credit in respect of duty paid on the wrapping paper at the earlier stage of its being taken for packing other varieties of paper under Rule 56-
