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PETITIONER: COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

       Vs.

RESPONDENT: DECENT DYEING CO.

DATE OF JUDGMENT07/12/1989

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RAY, B.C. (J)

CITATION:  1989 SCR  Supl. (2) 430  1990 SCC  (1) 180  JT 1989  Supl.    377    1989 SCALE  (2)1262

ACT:     Central  Excises and Salt Act, 1944: Section 35L(b)  and Rule    9(2)--Assessee--Dyeing   acrylic   yarn    on    Job charges--Levy of excise duty--Legality of.

HEADNOTE:     The  Respondent  Company was in the business  of  dyeing acrylic  yarn  received from traders  and  manufacturers  of hosiery  goods on job basis. It was paying duty at the  rate of  Rs. 10 per K.G. in terms of Notification  No.  125/75-CE dated  12.5.1975 on the presumption that base yarn had  dis- charged duty liability before it was received for dyeing.  A show  cause notice under section 9(2) of the Central  Excise Rules, 1944 was issued by the Assistant Collector of Central Excise  demanding  an amount of Rs.4,300 as  central  excise duty (C) Rs.24 per K.G. on 180 Kgs. for the period May  1976 to  July  1976. The demand was resisted  by  the  Respondent Company contending that duty on base yarn was payable by the Manufacturers  and the burden of showing that this  had  not been paid by the Manufacturers was on the Revenue which  was not  accepted  and on appeal by the Assessee  the  Appellate Collector of Central Excise confirmed the demand. On further appeal,  however, the Appellate Tribunal upheld the  conten- tion  of  the Respondent holding that the  Manufacturer  was liable  to pay duty on the base yarn since purchasers  could naturally  assume  that  the duty on base  yarn  would  have already  been paid by the Manufacturer and that it  was  for the  Department to verify the fact of such payment and  take action  against the manufacturer, if duty had not been  paid particularly  when in this case the Assessee  had  disclosed the names of persons/manufacturers from whom it had received the yarn for dyeing while the matter was pending before  the Collector. Dismissing the appeals preferred by the Revenue, this Court,     HELD: Excise is a duty on manufacture. The liability  of payment of this duty is on the manufacturer. The language of the  Notification No. 125/75 dated 12th May  1975  indicates that  only the duty for the time being leviable on the  base yarn,  if not already paid, plus ten rupees per kg. was  the liability. The description of manufacture was textured  yarn produced out of base yarn. [434B] 431

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   It would be intolerable if the purchasers were  required to  ascertain whether excise duty had already been  paid  as they have no means of knowing it. It has to be borne in mind that duty of excise is primarily a duty levied on a manufac- turer or a producer in respect of the commodity manufactured or  produced.  A  processor is in the  similar  position  as purchaser of the goods. [434D-E]     Sulekh Ram & Sons v. Union of India & Ors., [1978] ELT J 525  and Governor General in Council v. Province of  Madras, 72 Indian Appeals 91, referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2 15  152 (NM) of 1986 etc.     From the Order dated 8.5.1984 of the Customs Excise  and Gold  Control/Appellate  Tribunal, New Delhi in  Appeal  No. 2530/83-D  & Cross objections 27/84, Order No. 258/84-D  and Misc. Order No. 67 84-D.     A.K.  Ganguli, P. Parmeswaran and Hemant Sharma for  the Appellant. Gobinda Mukhoty and P.N. Gupta for the Respondent. The Judgment of the Court was delivered by     SABYASACHI MUKHARJI, J. This is an appeal under  section 35L(b) of the Central Excises & Salt Act, 1944  (hereinafter referred to as ’the Act’) against the judgment and order  of the  Customs, Excise and Gold (Control) Appellate  Tribunal, New Delhi (hereinafter referred to as ’the Tribunal’)  dated 8th May, 1984.     The  appeal  is by the revenue. The  respondent,  Decent Dyeing  Co.,  was dyeing acrylic yarn on  job  charges.  The acrylic  yarn  was  being received by  the  respondent  from traders  in the market or from the manufacturers of  hosiery goods  and were returning the same to them after  completing the required process. The respondent was paying duty at  the rate of Rs. 10 per kg. in terms of notification No.  125/75- CE  dated 12th May, 1975 on the presumption that  base  yarn had  discharged  duty liability before it was  received  for dyeing. A show cause notice requiring the respondent to show cause to the Assistant Collector of Central Excise as to why central  excise duty amounting to Rs.4,300 at Rs.24 per  Kg. leviable  on  180  kgs. (as applicable to  base  yarn  under tariff  item 18(i) of the Central Excise Tariff) should  not be  demanded  under rule 9(2) of the Central  Excise  Rules, 1944, was issued to the respondent. The Assistant  Collector of  Central  Excise directed the respondent  to  deposit  an amount of Rs.4,300 on the basis 432   of the demand of duty at Rs.24 per kg. on 180.00 kgs.  and directed the respondent to deposit the said amount under the proper  head. On appeal, the Appellate Collector of  Central Excise confirmed the said demand.      There  was an appeal and the Appellate Tribunal  upheld the  contention  of the respondent. The  Appellate  Tribunal found  that  the  case related to a demand  for  payment  of differential  duty  for the period May, 1976 to  July,  1976 with reference to texturing of base acrylic yarn received by the respondent from the manufacturers of such base yarn. The respondent,  the  Tribunal held, had cleared  such  textured yarn  on  payment  of duty at Rs. 10 per  kg.  claiming  the benefit  of notification No. 125/75. The  differential  duty payment  was Rs.24 per kg. leviable on the base  yarn.  ,The respondent  denied  theft  liability but it  was  upheld  as mentioned  ’hereinbefore. It was contended on behalf of  the

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appellant  before  the Tribunal.that duty on base  yarn  was payable  by the manufacturers of the base yarn only and  the burden  of showing that the said duty had not been  paid  by the  manufacturers was on the revenue. The authorities  had, however,  held  that the appellant was liable  to.  pay  the differential  duty since the appellant had failed  to  prove the  payment  of duty on the base yarn and,  therefore,  the said  orders were bad. On the other hand, on behalf  of  the revenue, it was contended that it was for the respondent  to prove  that the duty had been paid on the base yarn  and  if the  appellant  was paying the duty of Rs. 10 per  kg.  Only under  notification relied upon and in the absence of  proof of  payment of duty, the base yarn, the orders of the  lower authorities  making  the respondent liable to pay  the  duty were correctly passed. The Tribunal found that the  respond- ent was not the manufacturer of base acrylic yarn. The  work done by the respondent on the base yarn was by way of textu- rising  the same. In respect of the, same, the duty  payable on  the textured yarn produced out of base yarn is the  duty for  the  time being leviable on the base yarn, if  not  al- ready,  paid  plus  Rs.20 per  kg.  Under  notification  No. 125/75, the duty was reduced to the duty for the time  being leviable on the base yarn, if not already paid, plus Rs.  10 per kg.      In this connection, it is relevant to refer to  notifi- cation No. 125/ 75. The notification, which was issued under sub-rule  (1) of rule 8 of the Central Excise  Rules,  1944, stated  that the Government exempted the texturised yarn  of the description specified in column (3) of the Table annexed thereto  and falling under sub-items of item No. 18  of  the First  Schedule  to the Act as are specified in  the  corre- sponding  entries in column (2) of the said Table,  from  so much of the duty of 433 excise  leviable thereon as is in excess of the duty  speci- fied in the corresponding entries in column (4) of the  said Table. The relevant portion of the Table annexed to the said notification reads as follows: ----------------------------------------------------------- S. No. Sub-Item No. Description             Rate of duty ----------------------------------------------------------- 1.   (ii)   Textured Yarn produced  The duty for the             out of base yarn        time being leviable on                                     the base yarn,if not                                     already paid plus ten                                     Rupees per kilogram. ------------------------------------------------------------     Admittedly,  the respondent had paid duty at Rs. 10  per kg. and had been allowed to clear the goods. The demand  for differential  duty by way of duty payable on the  base  yarn was not in dispute. On the base yarn, the Tribunal held, the manufacturer was liable to pay duty only since purchasers of the  base yarn from the market could naturally  assume  that duty  on the base yarn would have been paid by the  manufac- turer  before removal and that it was for the department  to verify the fact of such payment and take action against  the manufacturer  if  base  duty had not been  paid.  Under  the relevant  tariff  item, the duty, as mentioned  before,  was fixed  as the duty for the time being leviable on  the  base yarn,  if not already paid, plus Rs.20 per kg.  (reduced  to Rs.  10  per kg. under the notification).  The  notification does  not change the basic position so far as base  duty  is concerned  from the aforesaid stand. The Tribunal held  that the revenue was entitled to claim duty inclusive of the duty paid  on base yarn only on proof that the duty on  the  base

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yarn  had  not been already paid, unless otherwise,  in  the normal  course, the presumption inevitable, in view  of  the nature  of the business, be that the duty on base  yarn  had been paid. If that is so, that cannot be the  responsibility or  the burden of the respondent to prove that the  duty  on base  yarn  had already been paid. It further  appears  that when the appeal was filed before the Collector, the respond- ent  had disclosed the names of the persons from  whom  they had received the yarn as also the names of the manufacturers enclosing  the copies of the relevant record. But even  then the  revenue  had not chosen to verify these facts  and  the Collector  (Appeals) had passed his order on the basis  that it  was  for the respondent to prove the actual  payment  of base  duty. This approach is not proper approach. It is  not correct  to  state  that the respondent  alone  should  have special knowledge of the fact of payment of base duty and it was therefore for the respondent to prove the said fact.  In that view of the matter, the 434 Tribunal  held  in favour of the respondent. We are  of  the opinion that the Tribunal was right.     Excise  is a duty on manufacture. The liability of  pay- ment  of this duty is on the manufacturer. The  language  of the  notification  referred to hereinbefore  indicates  that only the duty for the time being leviable on the base  yarn, if not already paid plus ten rupees per kg. was the liabili- ty.  The description of manufacture was textured  yarn  pro- duced  out of base yarn. We are clearly of the opinion  that in view of the facts and the circumstances of the case,  the Tribunal was right in the view it took. In this  connection, it is instructive to refer to rule 49 of the Central  Excise Rules,  1944, which deals with duty chargeable only  on  the removal  of the goods from the factory premises or  from  an approved  place of storage. Reference was also  made  before the  Tribunal and our attention was also drawn to the  deci- sion  of the Delhi High Court in Sulekh Ram & Sons v.  Union of India & Ors., [1978] ELT J 525, where under rule 9 of the Central  Excise Rules, it was held by the Delhi  High  Court that  under excise system, no goods can be removed from  the place of manufacturer without first paying the excise  duty, therefore, a purchaser can presume that goods are duty paid. It  would be intolerable if the purchasers were required  to ascertain whether excise duty had already been paid as  they have no means of knowing it. It has to be borne in mind that duty of excise is primarily a duty levied on a  manufacturer or  a producer in respect of the commodity  manufactured  or produced.  See the observations of Lord Simonds in  Governor General in Council v. Province of Madras, 72 Indian  Appeals 91. In a situation of this nature, the Delhi High Court held that the processor was in the similar position as a purchas- er  of the goods. In that view of the matter, we are of  the opinion that the Tribunal was right in the view it took.     We  have  heard learned counsel for  the  appellant  and considered  the matter. We find no merit in the  appeal  for the reasons mentioned above.     In that view of the matter, this appeal must fail and is accordingly dismissed without any order as to costs. Appeals dismissed. 435 CIVIL APPEAL NOS. 214 1-42 (NM) OF 1986. Collector of Central Excise, Chandigarh Versus 1. M/s Navrang Dyeing Co. & Ors. 2.  M/s Capital Dyeing Co This is an appeal under s.  35L(b) of the Act from the judgment

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and  order of the Tribunal dated 17th April, 1984.  For  the reasons  in civil Appeals Nos. 2151-52, these  appeals  must also fail and are accordingly dismissed without any order as to costs. R.N.J.                                         Appeal   dis- missed 436