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1987 Supreme(All) 562
IN THE HIGH COURT OF ALLAHABAD
R. M. Sahai and Om Prakash, JJ.
RAMAN ELECTRICALS - Appellant
Versus
UNION OF INDIA (UOI) AND ANR. - Respondents
Civil Misc. Writ Petition 835 Of 1985
Decided On : 12/10/1987
Sunil Gupta
Goods manufactured in a factory and intended for use in the factory in which they are manufactured are exempt from duty under Notification No. 118/75-C. E. dated 30-4-1975.
Headnote:
EXCISE DUTY - LEVIABILITY - PARTS MANUFACTURED AND USED FOR CAPTIVE CONSUMPTION - EXEMPTION - NOTIFICATION NO. 118/75-C. E. DATED 30-4-1975 - REFUND OF DUTY PAID - LIMITATION - ARTICLE 226 OF THE CONSTITUTION OF INDIA.
Fact of the Case:
The petitioner, a factory engaged in the manufacture of electric transformers, started repairing fused or defective transformers in 1975. The dispute arose over the payment of duty on the value of parts produced in the factory and replaced in the course of repair of transformers. The petitioner claimed exemption from duty under Notification No. 118/75-C. E. dated 30-4-1975, which exempted goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory and intended for use in the factory in which they are manufactured, from the whole of the duty of excise leviable thereon.
Finding of the Court:
The Court held that the petitioner was entitled to exemption from duty under Notification No. 118/75-C. E. dated 30-4-1975, as the parts manufactured in the factory and used in the course of repair of transformers were intended for use in the factory in which they were manufactured. The Court also held that the petitioner's claim for refund of duty paid between April 1979 and September 1983 was not barred by limitation, as the petitioner had filed the petition in October 1985, which was within a reasonable time from the date of knowledge of the mistake of law.
Issues: 1. Whether the petitioner was entitled to exemption from duty under Notification No. 118/75-C. E. dated 30-4-1975? 2. Whether the petitioner's claim for refund of duty paid between April 1979 and September 1983 was barred by limitation?
Ratio Decidendi: 1. The Court held that the petitioner was entitled to exemption from duty under Notification No. 118/75-C. E. dated 30-4-1975, as the parts manufactured in the factory and used in the course of repair of transformers were intended for use in the factory in which they were manufactured. The Court relied on the provisions of the Notification, which exempted goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), manufactured in a factory and intended for use in the factory in which they are manufactured, from the whole of the duty of excise leviable thereon. 2. The Court held that the petitioner's claim for refund of duty paid between April 1979 and September 1983 was not barred by limitation, as the petitioner had filed the petition in October 1985, which was within a reasonable time from the date of knowledge of the mistake of law. The Court relied on the decision of the Supreme Court in State of M. P. v. Bhailal Bhai, (A. I. R. 1964- S. G. 1006), which held that the maximum period fixed by the legislature as the time within which the relief by a suit in a Civil Court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 can be measured.
Final Decision: The petition was allowed and a direction was issued to the opposite parties to refund the amount of Excise duty paid between April 1979 to September 1983.
( 1 ) PRINCIPAL issue raised in this petition is leviability of duty on goods manufactured and used for captive consumption.
( 2 ) THE petitioner, a factory engaged in manufacture of electric transformers since 1972, started repairing of fused or defective transformers in 1975. Dispute is about payment of duty on value of parts produced in the factory and replaced in course of repair of transformer. In July, 1982 the government of India in case of Electric Equipment Factory which also carried on repair of transformers decided that in common parlance repair was clearly distinguishable from manufacture, therefore, the repaired transformer did not attract duty under tariff item No. 68. On 28th September, 1983 the petitioner relying on this decision applied for refund of duty paid on repair of transformers from April, 1983 to September, 1983. The application was allowed by the assistant Collector on 30th October, 1984 as the transformers were received from various electricity divisions of U. P. State Electricity Board under repairing contract and their repair did not amount to manufacture as held by Government of India. In November, 1984 the petitioner made another application for refund of duty paid on repair of transformers between 29th september, 1979 to 14th April, 1983. Since no order was passed the petitioner reiterated its claim by letters sent in February and October, 1985. But when no order was passed it invoked extraordinary jurisdiction of this Court on October, 1985. While entertaining the petition on 30th october, 1985 and inviting counter-affidavit the bench directed the Assistant Collector to dispose of the application for refund. But no orders were passed instead an order dated 18th december, 1985 was passed by Superintendent Central Excise without giving any notice to petitioner to pay duty on manufacture of certain parts used in process of repairs including coils etc. The order was passed presumably because since 24th October, 1983 the revised classification list showing that no duty was leviable on repaired transformer had been approved. On 5th February, 1986 this Court again directed opposite party to comply with its order dated 30th October, 1985. The Superintendent of Central Excise once again directed the petitioner on 4th March, 1986 to submit details of any pay (payment of) duty on old transformer after 24th september, 1983. On same day another notice was given Under Section 11a to petitioner to show cause as to why the amount of duty erroneously refunded for period 5th April, 1983 to 29th september, 1983 may not be recovered and on next day, that is, 5th March, 1986 the Assistant collector issued a notice to show cause as to why the refund application of petitioner for the period 3rd October, 1979 to 5th April, 1983 may not be rejected as it failed, to prove that the new components and the fresh raw material used and replaced in the process of repairs (if excisable) has discharged the respective burden of duty. The notice further required to show cause as to why should the claim be not rejected as barred by time. In reply it was stated, that in course of repair of damaged transformers, transformer oil or leg coils etc. are replaced and the invoice value represents the cost of these material plus painting and labour charges. All the materials and components used are purchased except the leg coils. Transformer oil, Procelain bushings, Bushing metal parts and painting material etc. is purchased from the market and wire used in leg coils is also a purchased material. In respect of leg coils it was claimed that it did not amount to manufacture. But even if it was assumed, that we manufacture leg coils and used them in transformers they are wholly exempted from duty by Notification No. 118/75 dated 30th april, 1975. The Assistant Collector however, by its order dated 30th May, 1986 rejected the claim as the petitioner in course of repair replaced certain parts such as magnetic steel core which
