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PETITIONER: M/S I.D.L. CHEMICALS LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       24/07/1996

BENCH: BHARUCHA S.P. (J) BENCH: BHARUCHA S.P. (J) THOMAS K.T. (J)

CITATION:  1996 SCALE  (5)505

ACT:

HEADNOTE:

JUDGMENT:                             WITH CIVIL APPEAL NO. 1590 OF 1991                          O R D E R      The appellants  manufacture  explosives  from  ammonium nitrate melt  80% at  a plant  in Rourkela, Orissa. The side ammonium nitrate  is purchase  form SAIL,  which also  has a plant in Rourkela.      On 11th  June, 1969 an Exemption Notification under the Central Excises  and Salt  Act,  1944,  (No.  164/1969)  was issued by  the Central Government exempting ammonium nitrate from the  whole of the exercise duty leaviable thereon if it was intended  to the  use in the manufacture, inter alia, or explosives, provided that the procedure set out in Chapter X of  the  Central  Excise  Rules,  1944,  was  followed.  The appellants applied for a licence under the said chapter x in respect of  the said  ammonium nitrate for use in the before it could  be market  as fertilizer. Hence, the said ammonium nitrate fell  outside the  purview of tariff Item No. 14 HH. This being  so, the  question of exemption of duty under the said Exemption  Notification did  not  arise.  Not  being  a fertilizer known  in  commercial  trade  parlance,  ammonium nitrate merited assessment under Tariff Item 68 and would be liable to the appropriate duty thereon.      Based upon  the said  letter of  the Central Board, the Superintendent, Central Exercise, Rourkela wrote to SAIL and demanded excise  duty upon  the said  ammonium nitrate under Tariff Item 68 at the rare prevailing from time to time with effect from  Ist March,   1975. On 7th February, 1978, Sail, In turn,  demanded payment  of the  said amount  of exercise duty from the appellants.      On 27th  July, 1978,  the Central  Board issued a show- case notice  to SAIL  to review  the order  of the Assistant Collector  dated  10th  August,  1977,  Aforementioned.  The matter was  contested by  SAIL  in reply dated 8th November, 1978 by  an order (No. 6/80 of 1980) made in November, 1980, the Central  Board set  aside the  order  of  the  Assistant

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Collector dated 10th August, 1977, and reclassified the said ammonium nitrate  under Tariff  item 68 with effect from 1st march, 1975.  On 16th  December, 1980  SAIL to the appellant demanding the  exercise duty on the said ammonium nitrate in accordance  with  the  order  of  the  Central  Board  dated November, 1980,  with effect  from Ist  March, 1975  to 23rd January, in  the sum  of Rs.  34,52,919.23. On 2nd February, 1981 appellant  filed writ  petition  (No.  183/1981)  which challenged the  order of  the Central  Board dated November, 1980 and the demand made pursuant thereto.      In the meantime, on 21st July, 1979, a notification was issued whereby  ammonium nitrate was excluded from Exemption Notification No.  164/1969 with effect from 21st July, 1979. This notification  was challenged  by the  appellants before the Orissa  High Court  in a writ petition (No. 86/1980). In the alternative, it was prayed that, in any event , upto the date of the notification, ammonium nitrate remained entitled to the exemption refund of duty amounting to Rs. 50,14,202/- collected for  the period  24th January,1978  to 20th  July, 1979, was sought.      On 5th  February, 1990  the earlier  writ petition (No. 86/1980) was  dismissed on  the around that the notification dated  21st   July,  1979   was  not  unconstitutional.  The alternative prayer was not considered.      On the same date, the High Court passed an order in the later writ  petition (No. 183/1981) referring the appellants to a  civil suit to claim monies form SAIL under Section 64A of the Sale of Goods Act.      Mr. Salve, learned counsel for the appellants has drawn out attention  to the  Exemption Notification  No.  164/1969 dated  11th  June,  1969,  which,  as  aforestated,  exempts fertilisers of  the description  stated in the Table therein from the  whole of  the excise  duty leviable  thereon under Tariff item 14HH of the first schedule to the Central Excise and Salt  Act, 1944.  The Table  lists ammonium  nitrate and specifies that  ammonium nitrate  shall be  entitled to such exemption if it is intended to be used in the manufacture of explosives. The notification also provides that no exemption thereunder would  be admissible unless the procedure set out in Chapter X of the Central Excise rules, 1944 was followed. Rule  192  of  Chapter  X  states  that  were  that  Central Government has  by notification  under Rule 8 sanctioned the remission of  duty on  excisable goods  used in  a specified industrial process,  any person  wishing to obtain remission of  duty  on  such  goods  shall  make  application  to  the Collector in  the proper  form stating  the estimated annual quantity of the excisable goods required and the purpose for and the  manner in  which it  is intended  to use  them  and declaring that  the goods  will be used for such purpose and in such  manner. There  to the user of the goods in relation to the  use for which the goods are intended. Mr. Salve also drew out  attention to  the Bond  which is  required  to  be furnished by  a person licensed to obtain excisable goods to be used  for specified  industrial purposes. It recites that the signatory  has been  permitted to  purchase from time to time goods  of the  stated quantity of the goods for use for the manufacture  commodities specified therein. It is one of the conditions  of the  Bond that  excise duty, should it be demanded on the goods should be paid within ten days demand. Mr. Salve  submitted that,  in the  context, the  burden  of payment of  excise duty  under Tariff  Item 68 upon the said ammonium nitrate  fell upon  the appellants  and  they  were affected thereby. It was, therefore, permissible for them to challenge the  correctness of the order of the Central Hoard which directed the said ammonium nitrate to be so classified

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Mr. Salve  submitted that the High Court was in error in not entertaining the  later writ  petition  (No.  183/1981)  and relegating the appellants to a civil suit. Whereas Mr. Salve did not  press the  prayer in the earlier writ petition (No. 86/1980) challenging the notification dated 21st July, 1979, which had  been held by the High Court to be constitutional, he was,  he submitted,  entitled to  press the  prayer  that ammonium nitrate  should have  been treated  as entitled  to exemption under  the Exception  Notification until  the  new Notification came  into effect  on 21st  July,  1979,  which prayer the High Court and not considered.      Our attention was drawn by Mr. Salve to the Judgment of this Court  in Assistant  General Manager  Central  Bank  of India &  Ors. vs. Commissioner Municipal Corporation for the City of Ahmedabad and Ors., 1995 (4) SCC 696. This held that a tenant  is entitled  to impugn in an appeal an increase in property tax because, under the relevant statute, the burden of such increase may be passed by the landlord to the tenant and also  because there  was, in  the case with which it was concerned, and agreement between the landlord and the tenant whereunder the  obligation to discharge and pay the property tax was  cast upon  the tenant. Mr. Salve submitted that the principle of the judgment would apply to the case before us.      Mr. Vellappally,  learned counsel  for the Union India, very fairly  and rightly, did not dispute that the burden of the  increase   in   excise   duty,   by   reason   of   the reclassification of  the said  ammonium nitrate,  would fall upon the  appellants, and  that, therefore,  the  appellants were  entitled     to   agitate   the   validity   of   such reclassification and  this could  not be  done in  the civil suit that was contemplated by the High Court.      There  is,   in   our   view,   no   doubt   that   the reclassification of  ammonium nitrate  by the  order of  the Central  Board   dated  November,   1980,  fasts   upon  the appellants the  obligation to  pay the  excise  duty that is leviable as  a result. Such obligation does not arise merely by reason  of an  agreement between SAIL. and the appellants but also  by virtue  of the  provisions of  Chapter X of the Central Excise  Rules, 1944.  the appellants  suffer adverse civil  consequences   and  have   therefore,  the  locus  to challenge the  reclassification. There is no form other than the High  Court under  Article 226 where they can do so, and the High  Court was  in error  in not entertaining the later writ petition (No. 183/1981) and referring the appellants to a civil  suit. Insofar  as the  earlier writ  petition  (NO. 86/1980) is  concerned, the  High Court  ought, for the same reason, toe have dealt with the contention of the appellants that ammonium  nitrate remained  except from  excise duty by reason of  the Exemption Notification until 21st July, 1979, when ammonium nitrate was removed from the purview thereof.      Upon the  basis set out above, the judgments and orders of the  High Court  in appeal  must  be  set  aside,  Except insofar as  the  one  judgment  and  order  deals  with  the constitutionality of  notification No.  225/1979 dated  21st July, 1979.  Both writ petitions (Nos. 183/1981 and 86/1980) shall stand restored to the file of the High Court for being considered on  merits. Writ  Petition No.  183/1981  is  its entirety  and  Writ  petition  No.  86/1980  insofar  as  it contends that ammonium nitrate remained exempt from exercise duty until  21st July,  1979 and  seeks relief consequential thereon.      The appeal are allowed accordingly. No costs.