IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.08.2010 CORAM: THE HONOURABLE MRS.JUSTICE R.BANUMATHI AND THE HONOURABLE MR.JUSTICE G.M.AKBAR ALI W.A.NO.3197 of 2002 1.The Maritime Collector, 121, Nungambakkam High Road Chennai-34 2.The Collector of Central Excise (Appeals) Nungambakkam Chennai – 34. 3.The Government of India rep.by its Secretary Ministry of Finance of Revenue Department of Revenue New Delhi ... Appellant /Respondent Vs. M/s.Madura Coats Limited Ambasamudram Mills rep.by its Asst.Logistics Manager Thirunelveli District. ... Respondent/Petitioner Prayer: Writ Appeal filed against the Order dated 3.1.2001 passed by the single Judge in W.P.No.11228 of 1992. WP no.11228/92: This Writ Petition presented to this Court under Article 226 of the constitution of India to issue a writ of Certiorarified Mandamus calling for the records of the respondents concerning orders in Original C.No.V/55/18/1/89 dated 28.12.2009 and order in Original C.No./V/55/18/89/dt.11.7.91 and direct the respondents to refund the excise duty of Rs.6,91,585.59 and Rs.49,330.51 paid by the petitioner company in the following AR 4As. https://hcservices.ecourts.gov.in/hcservices/ AR 4A Nos. Dated Amount of Excise duty paid 44 26.8.88 Rs. 70,647.56 52 25.9.88 Rs.2,03,586.24 58 9.11.88 Rs.2,13,765.55 72 8.3.89 Rs.2,13,765.55 31 22.11.89 Rs. 49,330.51 For Appellant : Mr.T.R.Senthil Kumar, Sr.Standing Counsel for Central Excise Department For Respondent : Mr.J.Shankar Raman JUDGMENT R.BANUMATHI,J. This Writ Appeal arises out of the Order of the learned single Judge dated 3.1.2001 passed in W.P.No.11228 of 1992 allowing the Writ Petition and quashing the order of Maritime Collector and thereby holding that the Respondent is entitled to rebate of Central Excise duty, being the duty paid on the yarn used for making thread. 2. Brief facts are that the Respondent has filed four rebate claims for a sum of Rs.2,03,586.24, Rs.70,647.56, Rs.2,03,586.24 and Rs.2,13,765.55, being the duty paid on the yarn content of thread, exported under AR4A Nos.52/88-89 dated 26.09.1988, 44/88- 89 dated 26.8.1988, 58/88-89 dated 09.11.1988 and 72/88-89 dated 08.03.1989 respectively. It was observed that the Respondent received single S.S.Polyester Yarn of 60/1 from M/s.Centenary Mill of Madurai for making S.S.Polyester thread of 60/2. The Polyester thread is exempted from duty vide notification No.53/87 dated 01.03.1987 and these goods alone are exported. After issuing show cause notice dated 6.9.1989 and after personal hearing, the 1st Appellant – Maritime Collector by order in C.No.V/55/18/1/89 dated 28.12.1989 rejected claim of Respondent for rebate of Central Excise duty holding as under: ".... In this case the duty paid S.S.Polyester Yarn has been cleared under GP1 from one factory to another factory and the same has been converted to S.S.Polyester thread and exported under AR4A. The quantity cleared for export from M/s.Madura Coats, Ambasamudram is 6500 Kgs., which involves processing. In fact the Yarn of 60/1 has https://hcservices.ecourts.gov.in/hcservices/ been converted to S.S.Polyester thread of 60/2 which is exempted from payment of duty. Hence, as far as Rule 12 and the Notifications issued there under are concerned, the duty on the goods exported only is eligible for rebate and not on the contents of the goods exported. Secondly, the duty paid goods should be directly exported from the factory and not after processing at some other site. Thirdly, the question here is whether the exporter is eligible for rebate of duty on the goods exported according to the provisions of Rule 12 and not whether the goods can be classified under one heading and considered one and the same." 3. Aggrieved by the order of 1st Appellant in rejecting the rebate claims, the Respondent filed Appeal before the 2nd Appellant- Appellate Authority, who by order dated 3.1.1991 in Appeal No.1/91-M rejected the Appeal No.260/90 (M). As against the same, revision was filed by the Respondent before the Government of India, which was also dismissed on 24.6.1991. 4. Even though the order of 1st Appellant in C.No.V/55/18/1/89 dated 28.12.1989 was unsuccessfully challenged upto the level of revision, again challenging the order of 1st Appellant in C.No.V/55/18/1/89 dated 28.12.1989, the Respondent filed W.P.No.11228 of 1992. 5. The Respondent again filed rebate claim for Rs.49,330.51 being the duty paid on the yarn content of thread exported under AR4A No.31/89-90 dated 22.11.1989. The said claim of Respondent (after issuing show cause notice and personal hearing) was also rejected by the Collector of Central Excise in C.NO.V/55/18/89-E- C dated 11.7.1991. The said order dated 11.7.1991 has also been challenged in the Writ Petition No.11228 of 1992. 6. The Appellants resisted the Writ Petition contending that the proviso (i) to Notification No.197/62 dated 17.11.1962 issued under Rule 12 of Central Excise Rules, 1944 for claiming rebate stipulates that "the goods are exported after payment of duty in cash direct from a factory or a warehouse". Stand of Appellants is that the above condition was not satisfied for the export of thread by the Respondent and the payment of excise duty of yarn by the sister concern of the Respondent is not relevant on the issue and therefore Maritime Collector has rightly rejected the rebate claim of the Respondent. 7. The learned single Judge held that the duty suffered yarn has been twisted into threads and it is the same yarn, which is in the form of thread and just because that yarn got transferred from one of the sister concerns of the Respondent, and got twisted into thread, the Excise Department cannot in any manner deny the rebate claims of Central Excise duty for the thread. The https://hcservices.ecourts.gov.in/hcservices/ learned single Judge further held that the excise duty was paid on yarn by the sister concern and Respondent Mill having exported the thread and thread has not lost its identity and therefore the Department cannot claim the yarn twisted into thread did not suffer the excise duty so as to deny the rebate lawfully claimed by the Respondent. The learned single Judge further held that only duty suffered yarn has been twisted into thread and the character of the yarn, which has suffered the excise duty, is in no manner different from yarn and on those findings the learned single Judge allowed the Writ Petition quashing the orders of the 1st Appellant dated 28.12.1989 and the 2nd Appellant dated 11.7.1991 and directed the Appellants to refund the excise duty of Rs.6,91,585.59 and Rs.49,330.51 paid by the Respondent. 8. Challenging the order of learned single Judge, the Central Excise Department has come forward with this Appeal. Mr.T.R.Senthil Kumar, learned counsel for the Appellants mainly contended that as against the impugned order dated 28.12.1989, the Respondent has already exhausted the statutory remedy and when the revision application preferred to the Central Government by the Respondent was dismissed, the Respondent cannot challenge the same invoking Article 226. In so far as the impugned order dated 11.7.1991 learned counsel would submit that as against the order passed by the Martime Commissioner of Central Excise, under Section 35 of the Central Excise Act, there is a statutory remedy of appeal and without exhausting the statutory remedy of appeal, the writ petition is not maintainable. 9. Learned counsel for the Appellants further submitted that the rebate claimed on exported excisable goods is regulated by Notification No.197/1962 dated 17.11.1962 and the rejection of rebate claim is in accordance with the notification. The learned counsel further contended that the duty on the goods exported only is eligible for rebate and not on contents of the goods exported. It was further argued that the duty paid goods should be directly exported from the factory and not after processing at some other site. Learned counsel for the Respondent has submitted that even after twisted into thread, yarn retained its identity and no new product is produced and therefore Central Excise Department was not justified in rejecting the rebate claim. The learned counsel would further submit that the policy of the Government is not to charge the excise duty on goods exported and once the Collector is satisfied that the goods in fact have been exported, it is for the Collector to allow such rebate even if all or any of the conditions laid down in any notification have not been complied with. The main thrust of argument of the Respondent is that the yarn has suffered duty, which was being twisted into thread and that no new commodity emerges and while so, the authorities cannot reject the claim of rebate of central excise duty being https://hcservices.ecourts.gov.in/hcservices/ paid on the yarn. 10. The prayer of mandamus in the writ petition is three fold i.e., to quash the orders of 1st Respondent in (i) C.No.V/55/18/1/89 dated 28.12.1989 ; and (ii) C.No.V/55/18/1/89 dated 11.7.1991 and consequently (iii) to direct Respondents to refund the excise duty of Rs.6,91,585.59 and Rs.49,330.51ps paid by the Respondent. 11. As rightly contended by the learned counsel for Appellants, as against the proceedings, dated 28.12.1989, Respondent preferred Appeal before the Collector of Central Excise (Appeals) and the same was dismissed on 3.1.1991, which was also challenged by way of revision before the Government of India. By the Order dated 24.6.1991, the revision also came to be dismissed. It is pertinent to note that in so far as four rebate claims made in AR4A No.52/88-89, 44/88-89, 58/88-89 and 72/88-89, Respondent has not challenged the order of the Revisional authority dated 24.6.1991. Having exhausted the statutory remedy available under the Act, it is not open to the Respondent to challenge the order of the 1st Appellant in C.NO.V/55/18/1/89 dated 28.12.1989 on the same grounds by invoking Article 226. 12. Insofar as the rebate claim for Rs.49,330.51, being the subject matter of the order in C.No.V/55/18/89-E-C dated 11.7.1991, as against the said order, under Section 35 of Central Excise Act, appeal lies to the Commissioner of Central Excise (Appeals). When there is a statutory remedy of Appeal, resort must be had to that statutory remedy. In the main Writ Petition, the Respondent has averred that the authorities concerned have already taken a view rejecting the rebate claim on the duty paid on the yarn, and therefore, no useful purpose would be served by preferring appeal before the same authorities. The contention of the Respondent is untenable. When an efficacious statutory remedy by way of appeal is available, the Respondent ought to have exhausted the remedy. 13. In SETH CHAND RATAN VS. PANDIT DURGA PRASAD (D) BY LRS AND OTHERS, (2003) 5 SCC 399, the Supreme Court lays down the principle, namely, when a right or liability is created by a Statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before seeking the discretionary remedy under Article 226 of the Constitution. However, the aforesaid principle is subject to one exception, namely, where there is a complete lack of jurisdiction of the tribunal to take action or there has been a violation of rules of natural justice or where the tribunal acted under a provision of law which is declared ultra vires. In such cases, notwithstanding the existence of such a tribunal, the High Court can exercise its jurisdiction to grant relief. https://hcservices.ecourts.gov.in/hcservices/ 14. Under Section 35 of Foreign Exchange Management Act, any person aggrieved by any decision or order of the Appellate Tribunal may file appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal. The Appellate Tribunal rejected the application for dispensation of pre-deposit and penalty. As against the order passed by the Appellate Tribunal, Writ Petition was filed before the Delhi High Court. In RAJ KUMAR SHIVHARE VS. ASSISTANT DIRECTOR, DIRECTORATE OF ENFORCEMENT & ANOTHER, 2010-4- L.W.1, referring to its earlier decision in Seth Chand Ratan's case, (2003) 5 SCC 399, and observing that by invoking Article 226, the Appellant thereon cannot be allowed to defeat the provisions of the statute, the Supreme Court held as under: "44. Therefore, principle laid down in the Ratan's case (supra) applies in the facts and circumstances of this case. If the appellant in this case is allowed to file a writ petition despite the existence of an efficacious remedy by way of appeal under Section 35 of FEMA this will enable him to defeat the provisions of the Statute which may provide for certain conditions for filing the appeal, like limitation, payment of court fees or deposit of some amount of penalty or fulfilment of some other conditions for entertaining the appeal. (See para 13 at page 408 of the report). It is obvious that a writ court should not encourage the aforesaid trend of by- passing a statutory provision." 15. Observing that in tax matters, judges must exercise self-discipline and that there shall be no short circuiting of statutory remedies, First Bench of this Court in M/S.NIVARAM PHARMA PRIVATE LIMITED REP.BY ITS DIRECTOR SADARMAL M.CHORDIA VS. THE CUSTOMS, EXCISE AND GOLD (CONTROL) APPELLATE TRIBUNAL, SOUTH REGIONAL BENCH, MADRAS, (2005) 2 M.L.J. 246, has held as under: "... 5. It is well settled by a series of decisions of the Supreme Court that particularly in tax matters there should be no short circuiting of the statutory remedies, vide Titaghur Paper Mills Company Limited v. State of Orissa, A.I.R. 1983 S.C. 603, Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Limited, A.I.R. 1985 S.C. 330, etc. 6. It is well settled that when there is an alternative remedy ordinarily writ jurisdiction of this Court under Art.226 of the constitution should not be invoked. This principle applies with greater force regarding tax proceedings. As observed by the Supreme Court in Titaghur Paper Mills Company Limited v. State of Orissa, A.I.R. 1983, S.C.603. "Where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of." https://hcservices.ecourts.gov.in/hcservices/ ..... 9. In C.A.Ibraham v. I.T.O. A.I.R. 1961 S.C. 609, H.B.Gandhi v. M/s.Gopinath and Sons, (1992) 2 S.C.C. (Supp.) 312 and in Karnataka Chemical Industries v. Union of India, (2000) 10 S.C.C. 13, the Supreme Court held that where there is hierarchy of appeals provided by the statute the party must exhaust the statutory remedies before resorting to writ jurisdiction. All these decisions are related to taxing statutes, and are hence apposite to the present context. 10. In Sheela Devi v. Jaspal Singh, A.I.R. 1999 S.C. 2859 and Punjab National Bank v. D.C.Krishna, (2001) 6 S.C.C. 569, the Supreme Court held that if the statute provides for remedy of revision or appeal, writ jurisdiction should not be invoked. 11. In Union of India v. T.R.Verma, (1958) 1 An.W.R. (S.C.) 67 = (1958) 1 M.L.J. (S.C.) 67 = (1958) S.C.J. 142 = 1958 M.L.J. (Crl.) 123 = AIR 1957 SC 882, the Supreme Court held that it is well settled that when an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not invoke the special jurisdiction of the High Court to issue a prerogative writ. It will be a sound exercise of discretion to refuse to interfere in a petition under Art.226 of the Constitution unless there are good grounds to do otherwise." 16. Applying the ratio of the above decisions, in our considered view, since under Sections 35 and 35-B of the Central Excise Act, statutory remedy of appeal is available to the Respondent, the Writ Petition is not maintainable. By invoking writ jurisdiction, the Respondent cannot be allowed to defeat the provisions of the statute. 17. Placing reliance upon a Division Bench judgment of this Court in MADURA COATS LTD. VS. COLLECTOR OF CENTRAL EXCISE, MADURAI, (2009 (246) E.L.T. 9 (Mad.)), the learned counsel for the Respondent contended that when the Writ Petition has been pending before High Court for more than 15 years, it was not desirable to ask the Writ Petitioner to avail alternative remedy before the CEGAT. That apart, since the export being made in 1988-89, at this distant point of time, it is not desirable to direct the Respondent to avail alternative remedy before the Appellate Authority. Since the learned single Judge has gone into the merits of the matter and ordered refund of the duty paid on the yarn, notwithstanding the availability of statutory remedy of appeal, we thought it fit to examine the merits of the case. 18. The period of exports effected from 26.8.1982 to 28.11.1989. Rule 12 of Central Excise Rules reads as under: "12. Rebate of duty on goods exported. - The Central https://hcservices.ecourts.gov.in/hcservices/ Government may, from time to time, by notification in the Official Gazette, grant rebate of duty paid on excisable goods, if exported outside India, to such extent, and subject to such safeguards, conditions and limitations as regards the class of goods, destination, mode of transport, and other allied matters as may be specified therein: Provided that if the Collector is satisfied that the goods have in fact been exported, he may, for reasons to be recorded in writing, allow the whole or any part of the claim for such rebate even if all or any of the conditions laid down in any notification issued under this rule have not been complied with." Notifications issued under Rule 12 stipulate procedure for grant of the rebate of the excise duty paid on excisable goods exported out of India. As per the Notification No.197/62, rebate of the duty paid on the excisable goods specified in the Table annexed shall, on their exportation out of India, or the State of Pondicherry, as the case may be, to the destinations mentioned in column (3) thereof, be made to the extent and subject to the conditions and limitations. The Notification requires that goods must be directly exported from the factory so as to be eligible for the rebate. In respect of claim of rebate, proviso (1) stipulates that the goods are exported after payment of duty in cash direct from a factory or a warehouse. 19. In the case of Respondent, rejection of the rebate claimed was only for the non-fulfilment of conditions laid down in Notification No.197/62 dated 17.11.1962. The Respondent received single S.S. Polyester Yarn of 60/1 from M/s.Centenary Mill of Madurai for making S.S.Polyester thread of 60/2 and the S.S. Polyester thread of 60/2 alone were exported by the Respondent. The Polyester thread is exempted from duty vide notification No.53/87 dated 01.03.1987. The condition that the goods are to be exported after payment of duty in cash direct from the factory or warehouse was not satisfied. 20. The learned single Judge took the view that the duty suffered yarn had been twisted into thread and the same yarn is in the form of thread and just for the reason that it was transferred from one of the sister concerns to that of the Respondent and got twisted into thread, the Department cannot contend that the thread content suffered the excise duty so as to deny the rebate that is lawfully claimed by the Respondent. The learned single Judge also observed that the Polyester thread even after twisting as thread, the yarn has not lost its character/identity. In our considered view, we are unable to subscribe to the views of the learned single Judge that the yarn twisted or folded and made thread does not loose its character. 21. Note 3 of Section XI of the first Schedule to Central https://hcservices.ecourts.gov.in/hcservices/ Excise Tariff Act of 1985 which came into force on 1.3.1986 and which was the law prevailing during the period of exports effected from 26.8.1988 to 22.11.1989 the relevant period reads as under: "For the purpose of Heading 52.03, 52.04, 54.04, 55.05 and 55.06 sewing thread means multiple (folded) or cabled yarn." a) Put up on support (for example reels, tubes) of a weight (including support) not exceeding 1000 gms. b) Dressed for use as a sewing thread c) With a final 'Z' twist. As rightly contended by the learned counsel for the Appellants, the above statutory prescription shows that all the multiple folded or cabled yarn are not sewing thread and it is only such of those doubled/multiple (folded or cabled yarn) which are dressed for use as sewing thread and with a final 'Z' twist and which are put up in support of a weight not exceeding 1000 gms alone is called sewing thread. 22. From the above, it is clear that the term "sewing thread" connotes a variety of yarn regardless of fibre, which is treated with solid or semi-solid or waxy materials to secure a smooth compact strand which is quite flexible but which presents no loose fibres. The very purpose of sub-clause (3) of Note 3 of Section XI of the First Schedule to the Central Excise Tariff Act 1985 stipulates the dressing of the yarn to make it fit for use as sewing thread by changing the service characteristics of the yarn. 23. The learned counsel for Appellants submitted that Number 60 is thinner than 40 and higher the number, the thinner the sewing thread. We are of the view that the above differentiation even among the sewing thread makes it clear that yarn and the sewing thread is not one and the same in excise parlance. While so, the learned single Judge was not right in saying that thread is nothing but twist or folding of yarn and that yarn does not loose its identity even after being made as thread. 24. As held by the 1st Appellant and the Appellate Authority, to claim rebate, as per Rule 12 and the notifications issued thereunder:- (i) The duty on the goods exported is only eligible for rebate and not on the contents of the goods exported; (ii) the duty paid goods should be directly exported from the factory and not after processing at some other site; The question is, whether exporter is eligible for rebate of duty on the goods exported and according to the provisions of Rule 12 and not whether the goods can be classified under one heading. https://hcservices.ecourts.gov.in/hcservices/ 25. In respect of the export effected by the Respondent, none of the above conditions are satisfied. The learned single Judge was not right in saying that the sewing thread does not loose its character as yarn and continues to retain its identity and the learned single Judge was not right in interfering with the order of the authorities. Laying emphasis upon the proviso to Rule 12, learned counsel for the Respondent contended that if the Collector is satisfied that the goods have in fact been exported, he may, for reasons be recorded in writing, allow, the whole or any part of the claim for such rebate even if all or any of the conditions laid down in any notification issued under Rule 12 have not been complied with. 26. Learned counsel for Respondent therefore contended that even if proviso (i) to Notification No.197/62 i.e., the goods are exported after payment of duty in cash direct from factory or warehouse is not satisfied, once the goods are exported it is always open to the Collector to order whole or any part of the claim for such rebate, notwithstanding that the conditions of notification have not been satisfied. The above contention of the Respondent cannot be countenanced. As per the proviso, it is purely the discretion of the Collector of Customs to order whole or any part of rebate even if the conditions laid down and notifications have not been complied with. There cannot be a writ of mandamus directing the authorities to exercise discretion in a particular manner. This is all the more so when in respect of earlier exports, the authorities have taken the view that the Respondent is not entitled to the rebate claimed on the duty paid on the yarn. The order of the learned single Judge cannot be sustained and is liable to be set aside. 27. In the result, the Writ Appeal is allowed and the order of the learned single Judge dated 3.1.2001 made in W.P.No.11228 of 1992 is set aside. It was stated before us that after allowing the writ petition, the excise duty of Rs.6,91,585.59ps plus Rs.49,330.51 was paid to the Respondent by the Department. It is open to the Appellants to