20 December 1996
Supreme Court
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M/S J.K. SYNTHETICS LIMITED Vs UNION OF INDIA AND ORS.

Bench: S.P. BHARUCHA,S.C. SEN
Case number: Appeal Civil 2709 of 1989


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PETITIONER: M/S J.K. SYNTHETICS LIMITED

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT:       20/12/1996

BENCH: S.P. BHARUCHA, S.C. SEN

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.P.BHARUCHA, J.      The Central Excise Tariff Act ,1985, came into force on 28th February,  1986. it  substituted the  Schedule  in  the Central Excises & Salt Act, 1944, whereunder, till then, the excise tariff  was prescribed. Prior to 28th February, 1986, exemption notifications  issued under  Rule 8 of the Central Excise Rules  had been in force . They ceased to have effect on the coming into force of the Tariff Act on 28th February, 1986. They  were replaced  by other exemption notifications, though not  precisely in  the same  terms.  The  process  of issuance of  these exemption notifications took some months. It was  realised that  by reason  thereof  manufacturers  of exempted items  would have  to  pay  duty  for  the  periods between the date on which the new tariff came into force and the dates  on which the exemption notifications were issued. It  was,  therefore,  that  the  Central  duties  of  Excise (Retrospective Exemption  ) Act,  1986, was  passed. It gave retrospective effect  to the exemption notification. What is relevant for  our purpose is section 2, which , so far as is relevant, reads thus:      "2.   Retrospective    Effect   for      certain notifications.  - (1) Every      notification    issued    by    the      Government of India in the Ministry      of finance (Department of Revenue )      on or  after the  3rd day of march,      1986, but  before the  8th  day  of      August, 1986,  in exercise  of  the      powers conferred by sub rule (1) of      rule 8 of the central Excise Rules,      1944, for the purpose of      (a) Maintaining the effective rates      of duties  of excise  in respect of      certain   goods    at   the   level      obtaining prior  to the 28th day of      February 1986  notwithstanding  the      changes in  the rates  of duties of      excise made  by the  Central Excise      Tariff Act,  1985 (5  of 1986), the

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    additional   Duties    of    Excise      (Textiles  and   textile  Articles)      Amendment Act, 1985 (6 of 1986), or      the  Additional  Duties  of  Excise      (Goods   of    Special   Importance      Amendment Act, 1985 (7 of 1986): or      (b) maintaining the effective rates      of duties  of excise  in respect of      certain   goods    at   the   level      obtaining  prior   to  1st  day  of      March,  1986   notwithstanding  the      changes in  the rates  of duties of      excise made  by the  Finance  Bill,      1986,      shall  ,   in  so   far   as   such      notification relates to such goods,      be  deemed  to  have  and  to  have      always had,  effect on and from the      1st day of March, 1986.      (2) The duties of excise which have      been collected, but which would not      have been  so collected if the said      notification had  been in  force at      all  material   times,   shall   be      refunded:      Provided that  no such refund shall      be  allowed  where  credit  of  the      duties of  excise  has  been  taken      under rule  56A or, as the case may      be, where  the goods  on which  the      duties on  excise  have  been  paid      have been  exported under  a  claim      for rebate of such duties."      (The  date  on  which  the  Central  duties  of  Excise (Retrospective  Exemption)   Bill  was  introduced  was  8Th August, 1986,)      The exemption  notification that  concerns us  in  this appeal was  issued on  3rd April, 1986, and it reeds, so far as it is relevant, thus:      "In   exercise    of   the   powers      conferred by sub-rule (i) of rule 8      of the  Central Excise Rules, 1944,      the   central   Government   hereby      exempts  excisable   goods  of  the      description specified in column (5)      of the  Table hereto  annexed (such      goods being hereinafter referred to      as "final  products")  and  falling      under such  Chapter, heading  no or      subheading no.  of the  Schedule to      the central Excise Tariff Act, 1985      (5 of  1986) as is specified in the      corresponding entry  in column  (4)      of the  said Table, from so much of      the duty of excise leviable thereon      under the  Central Excise  and salt      Act,  1944(1   of  1944),   as   is      equivalent to  the duty  of  excise      leviable  thereon  under  the  said      Central Excise and Salt Act, or the      additional duty  leviable under the      customs Tariff  Act,  1975  (51  of      1975), as  the case may be, already      paid   on    the   goods   of   the      description   specified    in   the

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    corresponding entry in column(3) of      the said  table (such  goods  bring      hereinafter    referred    to    as      "inputs") and  falling  under  such      Chapter,  heading   no.  or    sub-      heading no. of the said schedule as      is specified  in the  corresponding      entry  in  column(2)  of  the  said      Table.                          T A B L E ------------------------------------------------------------ Sl.No  Chapter, Description of inputs  Chapter  Description        heading                         heading   of final       No. or sub heading No           No. or     product                                       sub heading  No ------------------------------------------------------------ (1)    (2)          (3)                 (4)       (5) ------------------------------------------------------------ 6.     29      Mono ethylene glycel     54  polyester                                         or  staple fibre and                                         55  tow including                                             tops, and                                             polyestor                                             filament year,"      The said  notification was  amended on 3rd April, 1986, thus:      "In the  Table annexed  to the said notification, after S. No.  6 and  the entries  relating thereto,  the following shall be inserted, namely: ------------------------------------------------------------ (1)       (2)            (3)            (4)       (5) ------------------------------------------------------------ xxx       29                   xxx                    xxx 11.                      Acrylonitrile  59.03    Acrylic                                                  fibre xxx                            xxx                    xxx  " ------------------------------------------------------------      It was  further amended  on 3rd  April, 1986, to insert the following : ------------------------------------------------------------ (1)       (2)            (3)            (4)       (5) ------------------------------------------------------------ 17       2907.90     Vinyl acetate     55.01    Acrylic                      monomer                    fibre ------------------------------------------------------------      The   appellants   manufacture   the   final   products aforementioned.  They   claimed  the  benefit  of  the  said exemption notification,  as amended, in regard to the inputs aforementioned. The same was given to them on 29th December, 1989, and  they were  allowed credit in the aggregate sum of Rs.61,02,946.48 (This  sum took  into account  the amount of Rs.34,80,971.95 paid  as additional  duty). On  3rd January, 1987, a  show cause  notice was  issued  to  the  appellants alleging that  the aforesaid  credit  had  been  erroneously given,   the    said   notification    not   having   effect retrospectively. The  demand therein  was confirmed  on  7th December, 1987.      the appellants  challenged  the  order  confirming  the demand in  a writ  petition in  the Rajasthan High Court. by the judgement  and order under appeal the High Court allowed the writ petition in respect of the excise duty paid  on the inputs aforementioned  to the extent that they were used for the manufacture  for the  final products  aforementioned. so far as  the additional  duty was  concerned, the  High court declined to give similar relief. it is a little difficult to

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understand why,  but it  would appear  that the  High  Court found an absence of satisfactory pleadings.      There is  no dispute  that the  said  notification  has retrospective effect  for the  period 3rd March, 1986 to 8th August, 1986, by reason of the central duties of Excise (Retrospective exemption) Act, 1986.      By the said notification, as amended from time to time, the central Government exempted excisable goods described as final products  in the  Table thereof  from so  much of  the excise duty leviable thereon as was equivalent to the excise duty leviable under the excise Act or to the additional duty leviable under  the Customs  Tariff Act and had already been paid   on   the   goods   described   as   inputs   in   the correspondenting entry  of the  Table. Excise  duty upon the final product was exempted. it was exempted to the extent of the excise duty or the additional duty paid on the input, as the case may be On a plain reading of the said notification, the appellants  were entitled  to its benefit both in regard to the  excise duty  and the  additional duty  that they had paid on  the inputs  aforementioned used  to manufacture the final products aforementioned.      That the  same had  been paid  would appear to be clear from the order by which the appellants had been given credit therefore that  order was  not sought  to be recalled on the ground that  payment of  additional duty  had not  been made but,  it   would  appear,   on  the  ground  that  the  said notification did  not have  retrospective effect,  and  this contention of the respondents the High court rejected.      It is , therefore, necessary to modify the judgment and order of  the high  court and  hold that  the appellants are entitled to  the  benefit  of  the  said  notification  and, consequentially, to  refund of  the additional duty that had been  paid   on  the   inputs  aforementioned  used  in  the manufacture  of   the  final  products  aforementioned,  the precise  quantum   thereof  to   be  determined   by  excise authorities.      The appeal  is allowed  accordingly.  no  order  as  to costs.