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PETITIONER: ANDHRA RE-ROLLING WORKS, HYDERABAD

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT05/05/1986

BENCH: ERADI, V. BALAKRISHNA (J) BENCH: ERADI, V. BALAKRISHNA (J) KHALID, V. (J)

CITATION:  1986 AIR 1964            1986 SCR  (2)1001  1986 SCC  Supl.  263     JT 1986   322  1986 SCALE  (1)1208

ACT:      Central Excise and Salt Act 1944 : s. 3 & Item No. 26AA(i) First Schedule/Central Excise Rules 1944 r. 10 & 10A - M.S.  Rounds manufactured  by  re-rolling  untested  rails Excise duty  - Liability  of -  Eff ct  of Notification  No. 89/62 dated May 10, 1962.

HEADNOTE:      Item No.  26AA(i) of  the First Schedule to the Central Excise and Salt Act, 1944, at the relevant time provided for levy of excise duty on various semi finished steel items and all other  rolled, forged  or extruded  shapes and sections, not otherwise specified.      The appellant converted three thousand metric tonnes of untested rails  into M.S. Rounds of different specifications by the  process of  re-rolling, in execution of the contract entered into  between him  and the fifth respondent. me last delivery of  the finished  products was effected on February 23, 1966  and the  payment  received.  Nearly  eight  months thereafter, on  October 17,  1966 the  Inspector of  Central Excise issued  notices to  the appellant under r. 10A of the Central Excise  Rules, 1944 demanding payment of excise duty on the  rounds re-rolled.  A representation to the Assistant Collector contending  that the  demand for payment of excise duty was  illegal, since  the M.S. Rounds had been re-rolled from rails  which were  exempt from levy of excise duty, was rejected.      The appeal  to the  Collector and the revision petition to the Central Government were also rejected.      The appellant,  thereafter filed a petition in the High Court seeking  an appropriate  writ quashing  the notices of demand on  the ground  that the M.S. rounds in question were not liable to be assessed to duty under item No. 26AA of the First Schedule to the Act and that in any event the impugned demands were  time barred  under r.  10 of the Rules and the resort 1002 sought to  be made to the provisions contained in r. 10A was not legal  or warranted.  The High Court negatived all these contentions and dismissed the petition.      In the  appeal by  certificate to  this  Court  it  was

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further contended  that the  M.S. Rounds manufactured by the appellant were  exempted by Notification No. 89/62 dated May 10, 1962, which granted remission of the excise duty payable under item  No. 26AA  to the  extent of  the amount  of duty already paid  on the  articles from which the iron and steel products falling under that item had been made.      Dismissing the appeal, the Court, ^      HELD: 1.  The M.S.  Rounds manufactured out of untested rails by  the process of re-rolling fell within the ambit of item No. 26AA(i) of the First Schedule to the Central Excise and Salt-Act  1944, which  expressly took  within its  scope "all other  rolled, forged  or extruded shapes And sections, not otherwise  specified", and  were liable to be charged to duty under the said item. [1005 G; 1006 B]      2. The ambit of r. 10 of the Central Excise Rules, 1944 is confined  to cases  where the  demand is being made for a short levy caused wholly by one of the reasons given in that rule. It  pre-supposes an assessment which could be reopened on specific grounds within the period specified therein. The time limit  of three  months mentioned  in that  rule has no applicability in cases where there has been no assessment of duty before  the goods  were removed  from the factory. Such cases are  covered by  the provisions  of r. 10A, which is a residuary provision authorising the demand and collection of any deficiency  in duty  or of  any other  sum of  any  kind payable under  the Act  or the  rules without  any limit  of time. [1006 D; F-H]      Assistant  Collector   of  Central   Excise,   Calcutta Division v. Rational Tobacco Company of India Ltd., [1973] 1 S.C.R. 822  and D.R.  Kohli and  Ors. v. Atul Products Ltd., [1985] 2 S.C.R. 832, referred to.      3. It  is only  if the  appropriate amount  of duty had already been  paid on  the  article  which  formed  the  raw material for  manufacture of the product covered by item No. 26AA, that 1003 the  manufacturer   will  be  entitled  to  a  proportionate remission of the duty on the latter product. Inasmuch as the untested rails in the instant case were exempt from duty and no amount  whatever had been paid by way of duty on the said article out  of which the M.S. Rounds were manufactured, the benefit of  the notification  No. 89/62  dated May  10, 1962 could not be claimed by the appellant. [1005 G-H; 1006 A-B]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeal No. 56 of 1972.      From the  Judgment and  Order dated  5.11.1970  of  the Andhra Pradesh High Court in W.P. No. 3354 of 1968. C      Anil B.  Divan, D.N.  Misra, Ashok  Sagar and P.K. Rama Narain for the Appellant.      Gobind Das  P.P. Rao,  Miss Halida  Khatun, R.N. Poddar and A.K. Ganguli for the Resondents.      The Judgment of the Court was delivered by      BALAKRISHNA ERADI,  J. This  appeal has  been preferred against the  judgment of  the High  Court of  Andhra Pradesh dated November  5, 1970  on the strength of a certificate of fitness granted by the High Court.      The appellant  is a  firm carrying  on business of ’Re- rolling’ having  its factory  at Moosapet  near  Sanatnagar, Hyderabad. A contract was entered into between the appellant and the  5th respondent,  whereby the appellant undertook to

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convert 3000  metric tonnes  of second  class untested rails into M.S.  Rounds of different specifications by the process of Re-rolling.  Accordingly, the  quantity  of  3000  metric tonnes of  second class  untested rails  was supplied to the appellant by  the 5th  respondent during  the period between 29.4.1964 to  23.2.1966 and  the appellant duly executed the work and  ’delivered the  M.S. Rounds  and received  the Re- rolling  charges   in  accordance  with  the  terms  of  the agreement. The  last delivery  of the  finished products was effected by the appellant on 23.2.1966.      Nearly eight months thereafter, on October 17, 1966 the 1004 Inspector of  Central Excise, Ameerpet issued notices to the appellant dated October 17, 1966 demanding payment of excise duty on the Rounds Re-rolled by the petitioner from untested rails. me  demand notices were purported to have been issued under Rule  10-A of  the Central  Excise  Rules,  1944.  The appellant filed  a written  representation to  the Assistant Collector, Central  Excise, Hyderabad  contending  that  the demand for  payment of  excise duty  on the  M.S. Rounds was illegal since  they had been Re-rolled from rails which were exempt from levy of excise duty.      The Assistant  Collector by his order dated January 17, 1967 rejected  the said contention. However, while doing so, he gave  a direction  to the  Inspector of Central Excise to revise the  demands in  accordance with  the rates  of  duty which were  current during  the different  periods. Pursuant thereto, three  revised demand  notices dated March 18, 1967 were  issued  to  the  appellant.  The  appellant  thereupon preferred  an  appeal  to  the  Collector,  Central  Excise, Hyderabad. But that appeal was rejected by the Collector and the demands were confirmed. A Revision Petition filed by the appellant to  the Central  Government also met with the same fate. Thereafter  the appellant filed a Writ Petition in the High Court  of Andhra   Pradesh  seeking an appropriate writ quashing the  notices of  demand on the ground that the M.S. Rounds in  question were  not liable  to be assessed to duty under Item  No. 26-AA  of the  First Schedule of the Central Excise and Salt Act, 1944 (hereinafter called ’the Act’) and that in  any event  the impugned  demands were  time  barred under Rule  10 of  the Central  Excise Rules,  1944 and  the resort sought to be made to the provisions contained in Rule 10-A was  not legal  or warranted.  Neither of the aforesaid contentions  found   favour  with   the   High   Court   and accordingly, the  Writ Petition  was dismissed.  Hence  this appeal by the appellant.      The description  of goods  given in Column No. 1 of the First Schedule  to the  Act against  Item No. 26-AA(i) as it stood at the relevant time was in the following terms :-           " Semi  finished steel  including blooms, billets,           slabs, sheet  bars, rods,  coils,  wires,  joists,           girders,  angles,  channels,  tees,  beams,  zeds,           trough, pilling and all other rolled, forged or 1005           extruded  shapes   and  sections;   not  otherwise           specified. In execution  of  the  contract  entered  into  between  the appellant  and   the  5th   respondent,  the  appellant  had converted 3000  metric tonnes  of untested  rails into  M.S. Rounds of  different specifications  by the  process of  Re- rolling. This  undoubtedly amounted  to  manufacture.  Since Item No.  26-AA(i) expressly  takes within  its  scope  "all other rolled,  forged or  extruded shapes  and sections, not otherwise specified",  the M.S.  Rounds manufactured  by the appellant by  the process  of Re-rolling were clearly liable

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to excise duty under the said item. C      We find  no substance in the contention urged on behalf of the  appellant that  the M.S.  Rounds manufactured  by it were covered  by the  exemption granted  by the Notification No.      89/62, dated May 10, 1962. The relevant portion of that Notification was In the following terms :- n           "The Central Government hereby exempts with effect           from 24th  April, 1962  iron  and  steel  products           falling under item No. 26-AA of the First Schedule           to the  Central Excise  and Salt Act, 1944 if made           from another  article falling  under the said item           and having  already paid the appropriate amount of           duty, from  so much  of the  duty of  excise as is           equivalent  to   the  duty  payable  on  the  said           article. The effect  of this Notification was only to grant a partial remission of  the excise duty payable under Item No. 26AA of the First  Schedule to  the extent of the appropriate amount of duty  which was  already paid on the articles from out of which the  steel products  falling under  Item No. 26-AA had been made.  In the  case before  us  the  M.S.  Rounds  were manufactured by Re-rolling untested rails on which no excise duty whatever  had been  paid. It is only if the appropriate amount of  duty had  already been  paid on the article which formed the  raw-material  for  manufacture  of  the  product covered Item  No.  26-AA,  that  the  manufacturer  will  be entitled to  a proportionate  remission of  the duty  on the latter product.  Inasmuch as  the untested rails were exempt from duty and hence no amount whatever had H 1006 been paid  by way  of duty  on the  said article from out of which the  M.S. Rounds were manufactured, it is obvious that the benefit  of the  Notification cannot  be claimed  by the appellant.      We have  therefore, no  hesitation to  uphold the  view expressed  by   the  High   Court  that   the  M.S.   Rounds manufactured by  the appellant fell within the ambit of Item No. 26-AA  and were  liable to  be charged to duty under the said item.      The next point urged on behalf of the appellant is that the demand  for duty  was bad  since it  was made beyond the period of  three months which is the time limit specified in Rule 10  of the  Central Excise  Rules, 1944. m e High Court has  categorically   found  that  in  the  present  case  no assessment or  levy of  duty had  been made at the time when the goods were removed from the factory of the appellant. As pointed out  by this Court in Assistant Collector of Central Excise, Calcutta  M vision  v. National  Tobacco Company  of India Ltd.,  [1973] 1  S.C.R. 822  Rule 10  pre-supposes  an assessment which  could be  re-opened  on  specific  grounds within the  period specified therein. The relative scope and applicability of Rules 10 and 10-A were considered in detail by this  Court in  the said  decision and  it was  explained "that Rule  10 should  be confined to cases where the demand is being  made for  a short levy caused wholly by one of the reasons given  in that  rule so that an assessment has to be reopened. The  said decision has been followed in the recent pronouncement in  the case  of D.  R. Kohli and Ors. v. Atul Products Ltd., [1985] 2 S.C.R. 832.      Applying the  tests laid  down in the aforesaid rulings it is clear that the time limit of three months specified in Rule 10  has no  applicability at  all in  the present  case since there  has been no assessment of duty before the goods were removed  and it  is not a case of short levy occasioned

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by any  of the  reasons specified in the said Rule. The case is, therefore,  covered by the provisions of Rule 10A, which is  a   residuary  provision   authorising  the  demand  and collection of  any deficiency in duty or of any other sum of any kind  payable to Central Government under the Act or the Rules without  any limit  of time.  Hence the High Court was clearly right in 1007 rejecting the  contention of  the appellant  that the demand notices issued  to it  under  Rule  10-A  were  illegal  and unsustainable.      The appeal  accordingly fails  and  is  dismissed  with costs. P.S.S.                                     Appeal dismissed. 1008