Case: Kuil Fireworks Industries Vs. Collection of Central Excise

a warehouse and the appellant was allowed to remove the goods without payment of any duty. It was not disputed that the remaining goods were also stored in a private warehouse and the appellant had filed bills of entry and complied with all the required formalities for debonding and clearance of the goods on January 28, 1988 and that the appellant was entitled to an order cancelling the licence of the private warehouse enabling it to remove the goods. On these facts this Court observed : Had the customs authorities passed order in accordance with law the same result would have followed as had been done on December 17, 1987 ........ There is no valid reason as to why the same procedure should not have been followed in respect of the remaining goods in respect of which the bills of entry were filed on January 28, 1988 for debonding and clearance of goods. Merely because the officer failed to discharge his duties by making illegal demand for deposit of redemption fine, the appellant could not be held liable to pay duty. The appellant is, therefore, entitled to the delivery of goods without paying any duty as on January 28, 1988 no duty was payable on the goods. (p. 124) (Supp SCC) : (at Pp. 168-69 of AIR). 3. The submission of Shri Murlidhar is that the principle laid down in the aforesaid decision of this Court in Priyanka Overseas Pvt. Ltd. v. Union of India, (1991 AIR SCW 150) (supra) is applicable in the facts of this case because the goods had been wrongly and illegally detained by the customs authorities on September 2, 1987 and by the time the goods were released for clearance on the basis of the interim order passed by the High Court on September 29, 1987, the exemption from duty under notification No. 167/86 had been withdrawn by notification No. 222/87, dated December 17, 1987. He has urged that the appellant cannot be made to suffer on account of illegal act of the excise authorities and that the principle laid down in Wallace Flour Mills Company (1989 (4) SCC 592 ) (supra) and Vazir Sultan Tobacco Co. Ltd. (1996 AIR SCW 1353) (supra) will have no application in the facts of this case. 4. Shri K. N. Bhat, the learned Additional Solicitor General, does not dispute that in view of the decision Priyanka Overseas Pvt. Ltd. (supra) the appellant could not be made to suffer on account of an illegal act of detention of the goods by the excise authorities and the principle of Wallace Flour Mills Company (supra) and Vazir Sultan Tobacco Co. Ltd. (supra) will have no application in this case. The learned Additional Solicitor General has, however, urged that even on September 2, 1987 the appellant was not entitled to claim exemption from duty in respect of goods which were detained since there was use of power in the manufacture of the goods. In this connection, the learned Additional Solicitor (General) has placed reliance on the decision of this Court in Standard Fireworks Industries v. Collector of Central Excise, (1987 (28) ELT 56 : AIR 1987 SC 829 ). 5. We are unable to accept the said contention of the learned Additional Solicitor General for the reason that the Assistant Collector of Central Excise had issued a show cause notice dated November 29, 1987 demanding central excise duty of Rupees 11,94,122.94 on the fireworks cleared from the factory of the appellant for the period from August 1, 1981 to September 16, 1987 on the ground that certain operations were carried on with the aid of power outside the premises of the factory by outsiders and hence exemption under notification No. 167/88, dated March 1, 1986 could not be available. In their reply to the said show cause notice the appellant stated that they had not used power in any of the processes in the manufacture of the fireworks in their factories or outside their premises and it was claimed that the chemicals used for such manufacture were hand pounded. By order dated December 18, 1990, the Assistant Collector held that it is incredible and highly improbable that flour mills which are run by power should undertake hand pounding and that the flour mills had undertaken the grinding of chemicals only by using power. It was also held that paper tubes, paper cones were also made by use of power and, therefore, the appellant was not entitled to exemption under notification No. 167/86, dated March 1, 1986. The said order of the Assistant Collector was set aside in appeal by the Collector (Appeals) by order dated August 29, 1991. The Collector (Appeals) held :- Although it alleged that appellants purchased paper tubes from Standard Paper Containers, Sivakasi and made paper tubes through Paper Tubes Works, Sivakasi, no evidence confirming the above allegation was cited either in the show cause notice or in the original order. The appellants denied making any tubes through Paper Tubes Works, Sivakasi. In the absence of any evidence to the appellants version has to be accepted. The conclusion that the Flour Mills run by power would not have undertake hand pounding and ignoring the bills produced stating that they have been carefully managed will not prove the departmental case since it is based on presumption and suspicion. In view of the foregoing there is no evidence at all in the available records to the effect that power had been used in or in relation to the manufacture of fireworks by the appellants rendering them ineligible for exemption under notification No. 167/86, dated March 1, 1986. 6. The said order of the Collector (Appeals) was not challenged by the department and has become final. In view of the order of the Collector (Appeals) dated August 29, 1991, it cannot be said that in respect of goods which were detained on the basis of order dated September 2, 1987 exemption was not available under notification No. 167/86, dated March 1, 1986.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]5. We are unable to accept the said contention of the learned Additional Solicitor General for the reason that the Assistant Collector of Central Excise had issued a show cause notice dated November 29, 1987 demanding central excise duty of Rupees 11,94,122.94 on the fireworks cleared from the factory of the appellant for the period from August 1, 1981 to September 16, 1987 on the ground that certain operations were carried on with the aid of power outside the premises of the factory by outsiders and hence exemption under notification No. 167/88, dated March 1, 1986 could not be available. In their reply to the said show cause notice the appellant stated that they had not used power in any of the processes in the manufacture of the fireworks in their factories or outside their premises and it was claimed that the chemicals used for such manufacture were hand pounded. By order dated December 18, 1990, the Assistant Collector held that it is incredible and highly improbable that flour mills which are run by power should undertake hand pounding and that the flour mills had undertaken the grinding of chemicals only by using power. It was also held that paper tubes, paper cones were also made by use of power and, therefore, the appellant was not entitled to exemption under notification No. 167/86, dated March 1, 1986.6. The said order of the Collector (Appeals) was not challenged by the department and has become final. In view of the order of the Collector (Appeals) dated August 29, 1991, it cannot be said that in respect of goods which were detained on the basis of order dated September 2, 1987 exemption was not available under notification No. 167/86, dated March 1, 1986.